SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 18, 1998
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-11427 04-2942374
- -------- ------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Main Street, Groton, MA 01471
------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (978) 448-6111
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
- ---------------------------------------------
On June 3, 1998, New England Business Service, Inc. ("NEBS") acquired from
ROMO Corp., a Colorado corporation with its principal office in Lakewood,
Colorado, all of the outstanding common stock of McBee Systems, Inc. and all
of the assets of McBee Systems of Canada, Inc. (collectively "McBee") for
consideration of approximately $50,400,000 in cash and approximately
$12,600,000 in stock for an aggregate purchase price of $63,000,000. The
source of the cash component of the purchase price was a loan made to NEBS in
the ordinary course of business under a revolving line of credit with
BankBoston, N.A. and Fleet National Bank, as lenders and agents thereunder,
and certain other financial institutions.
McBee manufactures and markets a line of checks and related products to small
businesses throughout the United States and Canada through a dedicated in-
house sales force. McBee is headquartered in Parsippany, New Jersey, and has
principal operating facilities in Ohio, Utah, Virginia and Toronto, Ontario.
In negotiating the amount of consideration to be paid for the stock and
assets of McBee, NEBS considered, among other things, the following factors
with respect to McBee: historical and projected financial results, the
quality and performance of management, the market values of comparable public
companies, and the projected financial performance of McBee and NEBS on a
combined basis.
There is no material relationship between NEBS and McBee or any of their
respective officers, directors or stockholders, other than the Stock Purchase
and Asset Purchase Agreements pursuant to which the acquisition was made and
the other agreements pertaining thereto.
Item 5. Other Events.
- ----------------------
On May 29, 1998, NEBS entered into an amendment (the "First Amendment") to
its Amended and Restated Revolving Credit Agreement dated December 18, 1997
with BankBoston N.A. and Fleet National Bank (together with certain other
financial institutions, the "Banks"), BankBoston, N.A., as agent for the
Banks, and Fleet National Bank, as documentation agent for the Banks (the
"Credit Agreement"). The First Amendment modified the terms and conditions
of the Credit Agreement to explicitly permit the acquisition of McBee and to
increase the total committed line of credit from $135,000,000 to
$165,000,000.
<PAGE>
Item 7. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements of Business Acquired
McBee Systems, Inc. and McBee Systems of Canada, Inc.
Combined Financial Statements for the Years Ended
December 27, 1997 and December 28, 1996 and Report of
Independent Public Accountants
McBee Systems, Inc. and McBee Systems of Canada, Inc.
Unaudited Financial Statements for the Three Months Ended
March 28, 1998
(b) Pro Forma Financial Information
Pro Forma Combined Condensed Financial Statements
Pro Forma Combined Condensed Consolidated Balance Sheet as of
March 28, 1998
Pro Forma Combined Consolidated Statement of Income for the
Year Ended June 28, 1997
Pro Forma Combined Consolidated Statement of Income for the
Nine Months Ended March 28, 1998
Notes to Pro Forma Combined Condensed Financial Statements
(c) Exhibits
Exhibit Number
- --------------
2.1 Stock Purchase Agreement by and among New England Business
Service, Inc. and ROMO Corp. dated as of May 1, 1998.
2.2 Agreement to Furnish Copies of Omitted Schedules and Exhibits
to Stock Purchase Agreement.
2.3 Asset Purchase Agreement by and among New England Business
Service, Inc., NEBS Business Forms Ltd., McBee Systems of Canada,
Inc. and ROMO Corp. dated as of May 1, 1998.
2.4 Agreement to Furnish Copies of Omitted Schedules and Exhibits
to Asset Purchase Agreement.
10.1 First Amendment to Amended and Restated Revolving Credit
Agreement dated as of May 29, 1998, by and among New
England Business Service, Inc., BankBoston N.A.
and Fleet National Bank (together with certain other
financial institutions, the "Banks"), BankBoston, N.A.,
as agent for the Banks, and Fleet National Bank, as
documentation agent for the Banks.
10.2 Agreement to Furnish Copies of Omitted Schedules and Exhibits
to Revolving Credit Agreement.
23.1 Consent of Independent Accountants.
<PAGE>
ARTHUR ANDERSEN LLP
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
COMBINED FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AS OF DECEMBER 27,1997
AND DECEMBER 28,1996
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of McBee Systems, Inc. and McBee Systems of Canada, Inc.:
We have audited the accompanying combined balance sheets of McBee Systems,
Inc. and McBee Systems of Canada, Inc., as of December 27, 1997 and December
28, 1996, and the related combined statements of operations and retained
earnings (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of McBee Systems,
Inc., and McBee Systems of Canada, Inc., as of December 27, 1997 and December
28, 1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Denver, Colorado,
February 20, 1998
<PAGE>
<TABLE>
MCBEE SYSTEMS, INC. AND MCBEE SYSTEMS OF CANADA, INC.
COMBINED BALANCE SHEETS - DECEMBER 27, 1997 AND DECEMBER 28, 1996
(IN THOUSANDS OF DOLLARS)
<CAPTION>
ASSETS 1997 1996 LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1996
------ ---- ---- ------------------------------------- ---- ----
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <S> <C> <C>
Cash and cash equivalents $ 171 $ 399 Accounts Payable $ 1,842 $ 1,368
Current marketable securities 381 340 Accrued Liabilities -
Accounts Receivable, Wages and employee benefits 2,168 1,837
principally trade, Sales and property taxes, and other 1,332 1,010
less allowance Current portion of capital leases 88 84
for doubtful accounts of ------ ------
$571 in 1997 and Total Current Liabilities 5,430 4,299
$555 in 1996 7,379 7,077
Inventories 3,534 3,176
Current deferred taxes 493 360
Prepaid expenses and other 279 250
----- ------
Total Current Assets 12,237 11,602 LONG-TERM DEBT TO PARENT 26,525 29,203
LONG-TERM CAPITAL LEASES 23 111
LONG-TERM DEFERRED TAXES 100 317
PROPERTY, PLANT & EQUIPMENT: OTHER LIABILITIES 254 261
Land 1,817 1,904 COMMITMENTS AND CONTINGENCIES (Note 4) -- --
Buildings and improvements 3,091 2,789 ------ -------
Machinery and equipment 12,487 12,599 Total Liabilities 32,332 34,191
------ ------
17,395 17,292
STOCKHOLDERS' DEFICIT
Less accumulated depreciation (10,128) (10,172)
-------- --------
Common stock (McBee Systems, Inc.:
Property, plant and $.01 (U.S.$) par value, 100,000
equipment, net 7,267 7,120 shares authorized, 50,000 shares
issued and outstanding in 1997 and
1996; McBee Systems of Canada, Inc.:
$.01 (CAN$) par value, unlimited shares
authorized, 290,050,000 shares
issued and outstanding in 1997 and 1996) 2,500 2,500
INTANGIBLE ASSETS, NET 255 456 Additional paid-in capital 584 584
Retained deficit (14,446) (16,852)
Cumulative foreign currency translation
adjustments ( 432) ( 359)
Unrealized gains on investments 125 79
---------- ----------
PREPAID PENSION COSTS AND
OTHER ASSETS 904 965 Total Stockholders' Deficit (11,669) (14,048)
----- -----
TOTAL LIABILITIES AND STOCKHOLDERS' ------- -------
TOTAL ASSETS $20,663 $20,143 DEFICIT $20,663 $20,143
======= ======= ======= =======
The accompanying notes to combined financial statements are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
COMBINED STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
FOR THE YEARS ENDED DECEMBER 27,1997 AND DECEMBER 28,1996
(IN THOUSANDS OF DOLLARS)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 59,604 $ 56,024
Cost of Sales 18,154 17,333
-------- --------
Gross Profit 41,450 38,691
Selling Expenses 28,582 26,210
General and Administrative Expenses 6,020 6,101
-------- --------
Income From Operations 6,848 6,380
Interest Expense ( 2,815) ( 3,071)
Amortization of Intangibles ( 186) ( 1,324)
Other Expense ( 101) ( 144)
-------- --------
Income Before Income Taxes 3,746 1,841
Income Tax Expense ( 1,340) ( 614)
-------- --------
Net Income 2,406 1,227
Retained Deficit Beginning of Year (16,852) (18,079)
--------- ---------
Retained Deficit End of Year $(14,446) $(16,852)
========= =========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 27,1997 AND DECEMBER 28,1996
(IN THOUSANDS OF DOLLARS)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,406 $ 1,227
Non-cash expense (income):
Depreciation and amortization 1,464 2,495
Losses on disposal of assets 11 184
Change in deferred income taxes (350) 17
Other 193 72
Changes in assets and liabilities:
Accounts receivable (302) ( 504)
Inventories (358) 79
Prepaid expenses and other ( 29) 18
Accounts payable and accrued liabilities 1,127 551
------- -------
Net cash flows from operating activities 4,162 4,139
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of asset 66 22
Capital expenditures (1,653) (1,805)
Proceeds from sales and maturities
of marketable securities 24 --
Purchases of marketable securities (65) (163)
------- -------
Net cash flows used in investing activities (1,628) (1,946)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings and capital leases (5,619) (3,722)
Proceeds on borrowings and capital leases 2,857 1,641
Net cash flows used in financing activities (2,762) (2,081)
------- -------
Net (decrease) increase in cash and cash equivalents (228) 112
Cash and cash equivalents at beginning of year 399 287
------ ------
Cash and cash equivalents at end of year $ 171 $ 399
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,789 $ 3,096
Income taxes $ 1,824 $ 650
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 27,1997 AND DECEMBER 28,1996
(ALL AMOUNTS IN THOUSANDS OF DOLLARS)
(1) ORGANIZATION
------------
McBee Systems conducts its operations through the following two companies:
McBee Systems, Inc., and McBee Systems of Canada, Inc., (together referred to
as the "Companies"). The Companies are wholly-owned subsidiaries of ROMO
Corp. (the "Parent"). The principal business of the Companies is the
production and sale of checks, accounting forms, and other printed materials.
The principal markets for the Companies' products are small businesses in the
United States and Canada. There are no significant concentrations of sales to
single industries or customer classes. The accompanying financial statements
are presented on a 52-week year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Estimates and Assumptions
-------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Combination
-------------------------
The accompanying combined financial statements include the accounts of McBee
Systems, Inc., and McBee Systems of Canada, Inc. All significant intercompany
accounts and transactions have been eliminated.
Translation of Foreign Currency
-------------------------------
The Companies translate accounts stated in foreign currencies in conformity
with provisions of Statement of Financial Accounting Standard No. 52, "Foreign
Currency Translation."
Cash and Cash Equivalents
-------------------------
The Companies consider all highly liquid investments and debt instruments with
an original maturity of three months or less to be cash equivalents.
Marketable Securities
---------------------
The Companies record their investments in conformity with the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement entails
categorizing all debt and equity securities as held-to-maturity securities,
trading securities, or available-for-sale securities, and then measuring the
securities at either fair value or amortized cost.
At December 27, 1997, the Companies' marketable securities portfolio consisted
of shares of mutual funds held in trust for executives' deferred compensation.
At December 27, 1997, all of the Companies' marketable securities were
categorized as "available-for-sale" and carried at fair value.
<PAGE> 1
Marketable securities at December 27, 1997 were as follows:
Fair Cost Unrealized
Value Basis Gain/(Loss)
----- ----- -----------
Shares of mutual funds $381 $256 $125
==== ==== ====
During 1997, the Companies received proceeds of approximately $24 from sale of
mutual funds, realizing a net gain of $0. The cost basis used in computing
the realized gain was $24 which comprises the December 28, 1996 amortized cost
plus new purchases during 1997 and reinvested dividends.
At December 28, 1996, the Companies' marketable securities portfolio consisted
of shares of mutual funds held in trust for executives' deferred compensation.
At December 28, 1996, all of the Companies' marketable securities were
categorized as "available-for-sale" and carried at fair value.
Marketable securities at December 28, 1996 were as follows:
Fair Cost Unrealized
Value Basis Gain/(Loss)
----- ----- -----------
Shares of mutual funds $340 $261 $79
==== ==== ===
During 1996, the Companies received no proceeds from sales of mutual funds,
realizing no gain or loss.
Trade Accounts Receivable
-------------------------
The Companies' continuing operations grant credit to their customers in the
United States and Canada and have no concentration of receivables due from
certain entities, industries, or regions.
Inventories
-----------
Inventories are valued at the lower of cost or market. Costs have been
determined using the first-in, first-out (FIFO) method.
1997 1996
---- ----
Raw Material $ 766 $ 797
Work In Process 444 316
Semi-finished Goods
and Finished Goods 2,324 2,063
----- -----
Total Inventories $3,534 $3,176
====== ======
Property, Plant and Equipment and Depreciation
----------------------------------------------
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method. Buildings are depreciated over 30 years. Leasehold
improvements are depreciated over their estimated useful lives,
<PAGE> 2
generally 5 years, or the terms of the leases, whichever is shorter.
Machinery and equipment are depreciated over useful lives of 3 to 10 years.
When an asset is retired, the cost and related depreciation are removed from
the accounts and a gain or loss is recorded.
Costs of major additions and improvements are capitalized. Maintenance and
repairs are expensed as incurred.
Intangible Assets
-----------------
Intangible assets consist of customer lists, customer artwork, computer
software, and acquisition costs. Intangibles are amortized on a straight-line
basis over a period of 3 to 10 years. The accumulated amortization was
$21,665 and $21,552 at year end 1997 and 1996, respectively.
Income Taxes
------------
The Companies record income taxes in conformity with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This Standard requires recognition of deferred tax liabilities and
assets for the differences between the financial statement and tax basis of
assets and liabilities, using enacted tax rates in effect for the year in
which the differences are expected to reverse.
The net deferred tax assets at the end of 1997 and 1996 consist of the
following:
1997 1996
---- ----
Gross Deferred Tax Assets $ 666 $ 465
Gross Deferred Tax Liabilities (273) (422)
------ ------
393 43
Valuation Allowance -- --
------ ------
Net Deferred Tax Assets $393 $ 43
====== ======
Deferred tax assets and liabilities result primarily from timing of deductions
for book accounting reserves and depreciation.
At December 27, 1997 and December 28, 1996, the Companies have recorded
valuation allowance reserves of $0. The Companies' management believes it is
more likely than not that the net deferred tax assets will be fully utilized.
<PAGE> 3
The net income tax benefit (expense) for 1997 and 1996 consists of the
following:
1997
---------------------------
State Federal Foreign Total
----- ------- ------- -----
Current $(198) $(1,508) $ 16 $(1,690)
Deferred -- 322 28 350
------ -------- ---- --------
Total $(198) $(1,186) $44 $(1,340)
====== ======== ==== ========
1996
---------------------------
State Federal Foreign Total
----- ------- ------- -----
Current $(72) $ (462) $ (62) $(596)
Deferred -- 77 (95) (18)
----- ------- ------ ------
Total $(72) $ (385) $(157) $(614)
===== ======= ====== ======
Employment and Retirement Benefits
----------------------------------
Certain current and former employees of McBee Systems, Inc. were eligible to
participate in the following benefit programs sponsored by the Companies'
parent, ROMO Corp.:
The ROMO Corp. Medical and Dental Benefits Plan: A self-insured plan which
- ------------------------------------------------
provides medical and dental benefits for certain eligible U.S. employees and
retirees and their dependents.
The ROMO Corp. Savings Plus Plan: A qualified tax deferred defined
- ---------------------------------
contribution plan for certain eligible U.S. employees. During 1997 and 1996,
the plan's sponsor contributed 1.0% of each eligible participant's covered
compensation, with all eligible participants 100% vested in such 1.0%
contribution. The sponsor's matching contribution was 50% of the first 6.0%
of covered compensation actually contributed by a participant, with such
matching contribution subject to the current vesting schedule of 20% per year
of credited service until fully vested.
The ROMO Corp. Employees' Retirement Plan: A qualified defined benefit
- -------------------------------------------
pension plan which covered substantially all U.S. employees through 1993.
Effective December 25, 1993, the ROMO Corp. Employees' Retirement Plan was
frozen such that no additional benefits will be accrued for employees after
December 25, 1993; benefits already accrued under the Plan will not be
increased because of any subsequent period of service or increase in
compensation; all employees participating in the Plan became 100% vested in
their accrued benefit as of December 25, 1993; and no employees were enrolled
in the Plan after December 25, 1993. The benefits of the Plan are based on
age, years of credited service, and compensation. ROMO Corp.'s funding policy
is to fund pension cost as accrued, subject to the minimum funding
requirements of the Employee Retirement Income Security Act of 1974 and the
tax deductibility of such contribution. No contribution to the plan was
required in 1997 or 1996 as a result of the excess of the Plan's net assets
over accumulated plan benefits.
A proportionate share of the total sponsor's costs for these, and other,
benefit programs, net of participants' contributions, were charged directly to
McBee Systems, Inc. by the Companies' parent, ROMO Corp., and are included in
the results of the Companies' combined operations.
<PAGE> 4
(3) LONG-TERM DEBT TO PARENT
------------------------
McBee Systems, Inc., and McBee Systems of Canada, Inc., each have an
intercompany debt arrangement with their parent. Long-term debt to parent of
the Companies at December 27, 1997 and December 28, 1996 was as follows:
1997 1996
---- ----
Intercompany debt arrangement from McBee
Systems, Inc., to its parent; interest
payable monthly at prime rate plus 1.35%
(9.85% at December 27, 1997); due
December 1999. $22,799 $25,292
Intercompany debt arrangement from McBee
Systems of Canada, Inc., to its parent;
interest payable monthly at prime rate
plus 1.35% (9.85% at December 27, 1997)
plus the effects of a 10% withholding
tax imposed by the Canadian government;
due December 1999. 3,726 3,911
------ ------
Total long-term debt to parent $26,525 $29,203
====== ======
Interest expense incurred on long-term debt to parent was $2,807 in 1997 and
$3,061 in 1996.
From time to time, the Companies may receive advances and make repayments on
their intercompany debt arrangements with their parent, depending on their
cash needs. In each of their fiscal years, the Companies are scheduled to
make principal payments on their intercompany debt arrangements as follows:
1998 $ --
1999 26,525
Thereafter --
------
Total $26,525
======
(4) COMMITMENTS AND CONTINGENCIES
-----------------------------
Parent's Bank Loan
------------------
McBee Systems, Inc., and McBee Systems of Canada, Inc., are each referred to
as "Borrowers" on their parent's bank loan agreement, which was effective
March 12, 1993, and amended August 1, 1993, April 1, 1994, October 31, 1994,
March 12, 1996, and April 30, 1997. The balance of the parent's bank loan was
$4,800 as of December 27, 1997 and $7,200 as of December 28, 1996. The bank
loan is secured by the stock and substantially all of the assets of the
Companies and their parent, and contains restrictive covenants including
maintenance of a collateralized borrowing base, restrictions on further
borrowings, dividends and other capital distributions, sale of properties,
capital expenditures, debt service coverage, liabilities to tangible net
worth, current ratio, and tangible net worth.
<PAGE> 5
Operating Leases
----------------
The Companies lease various office and data processing equipment and certain
manufacturing, warehouse, and office facilities. Certain of the leases are
with an affiliate. These leases are classified as operating leases and expire
at varying times through 2002. Future minimum rental payments required under
operating leases having initial or remaining lease terms greater than one year
are as follows at December 27, 1997:
Affiliate Total
--------- -----
1998 $ 840 $ 2,307
1999 840 1,548
2000 840 1,174
2001 490 532
2002 -- 11
Thereafter -- --
------ -------
Total $3,010 $5,572
====== =======
Rental expenses for operating leases were $2,252 and $2,359 in 1997 and 1996,
respectively (including $840 and $931 for 1997 and 1996, respectively under
leases with an affiliate).
Capital Leases
--------------
During 1996 the Companies originated certain leases of machinery and equipment
which were classified as capital leases. Machinery and equipment financed
under this type of lease is capitalized at present value, and depreciated over
its estimated useful life. Future minimum lease payments of principal and
interest required under capital leases are as follows at December 27, 1997:
1998 $ 92
1999 23
Thereafter --
----
Total $115
====
Parent U.S. Income Tax Review
-----------------------------
An Internal Revenue Service ("IRS") audit of 1992, 1993 and 1994 of the
Companies' parent, ROMO Corp., was concluded during 1996. In September, 1996,
the IRS issued a Statutory Notice of Deficiency proposing adjustments relative
to 1992, 1993, and 1994, resulting in proposed tax and penalties of $12
million plus interest. The proposed adjustments related to issues associated
with the acquisition of McBee Systems, Inc., in 1989 and the sale of another
subsidiary in 1993. After consideration and in response, the Companies'
parent petitioned the United States Tax Court, challenging all proposed
adjustments. During the process of determining the agreed factual matters not
in dispute, the government conceded all issues related to the other subsidiary
and all penalties. The parties negotiated a settlement with respect to the
customer list for the years at issue, agreeing on a beginning customer list
value of $14,000, reducing the amortization deductions ratably over the life
of the customer list. The Judge of the Tax Court accepted this settlement and
entered her decision on December 23, 1997. The agreed deficiency amounts for
the Companies' parent were $14 for 1992 and $335 for 1993, totaling $349,
approximately 3.5% of the original tax deficiency assessment. Tax years
through 1994 are closed.
<PAGE> 6
In addition, the parties executed a closing agreement with respect to the
value of the customer list and the amortization deductions for 1995 and 1996.
The tax effect of this agreement was an additional tax amount for 1993 (due to
a reduction in net operating loss carryback from 1995) of $127 and an
additional $74 in 1996.
All tax amounts were paid by the Companies' parent on December 15, 1997.
(5) OTHER EMPLOYEE BENEFITS
-----------------------
The McBee Systems of Canada Inc. Pension Plan
----------------------------------------------
McBee Systems of Canada, Inc., (the "Company") sponsors a defined contribution
plan for certain eligible Canadian employees called the McBee Systems of
Canada, Inc. Pension Plan. The Company's matching contribution was 50.0% of
the first 4.0% of covered compensation actually contributed by a participant,
with such matching contribution subject to provincial vesting schedules or the
plan vesting schedule of the earlier of two years of participation or five
years of continuous employment. The Company will also make an additional
profit sharing contribution if specified annual sales and operating profit
goals are met. The Company paid certain plan administrative expenses and
contributed $214 to participant accounts in 1997 and $74 in 1996.
<PAGE> 7
<TABLE>
MCBEE SYSTEMS, INC. AND MCBEE SYSTEMS OF CANADA, INC.
COMBINED BALANCE SHEET - MARCH 28, 1998
(IN THOUSANDS OF DOLLARS)
UNAUDITED
<CAPTION>
ASSETS 1998 LIABILITIES AND STOCKHOLDERS' DEFICIT 1998
------ ---- ------------------------------------- ----
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <S> <C>
Cash and cash equivalents $ 167 Accounts Payable $ 1,447
Current marketable securities 407 Accrued Liabilities -
Accounts Receivable, net 7,578 Wages and employee benefits 1,526
Inventories 3,533 Sales and property taxes, and other 1,588
Current deferred taxes 493 Current portion of capital leases 89
Prepaid expenses and other 492 ------
------ Total Current Liabilities 4,650
Total Current Assets 12,670
LONG-TERM DEBT TO PARENT 26,772
LONG-TERM DEFERRED TAXES 100
PROPERTY, PLANT & EQUIPMENT: OTHER LIABILITIES 287
Land 1,839 COMMITMENTS AND CONTINGENCIES --
Buildings and improvements 3,108 -------
Machinery and equipment 12,772 Total Liabilities 31,809
------
17,719
STOCKHOLDERS' DEFICIT
Less accumulated depreciation (10,481)
--------
Common stock (McBee Systems, Inc.:
Property, plant and $.01 (U.S.$) par value, 100,000
equipment, net 7,238 shares authorized, 50,000 shares
issued and outstanding in 1997 and
1996; McBee Systems of Canada, Inc.:
$.01 (CAN$) par value, unlimited shares
authorized, 290,050,000 shares
issued and outstanding in 1997 and 1996) 2,500
INTANGIBLE ASSETS, NET 212 Additional paid-in capital 584
Retained deficit (13,562)
Cumulative foreign currency translation
adjustments ( 415)
Unrealized gains on investments 120
----------
PREPAID PENSION COSTS AND
OTHER ASSETS 916 Total Stockholders' Deficit (10,773)
-----
TOTAL LIABILITIES AND STOCKHOLDERS' -------
TOTAL ASSETS $21,036 DEFICIT $21,036
======= =======
The accompanying notes to combined financial statements are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
COMBINED STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 28,1998
(IN THOUSANDS OF DOLLARS)
UNAUDITED
<CAPTION>
1998
----
<S> <C>
Net Sales $ 15,875
Cost of Sales 4,732
--------
Gross Profit 11,143
Selling Expenses 7,309
General and Administrative Expenses 1,669
--------
Income From Operations 2,165
Interest Expense ( 641)
Amortization of Intangibles ( 100)
Other Income 76
--------
Income Before Income Taxes 1,500
Income Tax Expense ( 616)
--------
Net Income 884
Retained Deficit Beginning of Year (14,446)
---------
Retained Deficit End of Year $(13,562)
=========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 28,1998
(IN THOUSANDS OF DOLLARS)
UNAUDITED
<CAPTION>
1998
----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 884
Non-cash expense (income):
Depreciation and amortization 384
Other (9)
Changes in assets and liabilities:
Accounts receivable ( 290)
Inventories 1
Prepaid expenses and other ( 121)
Accounts payable and accrued liabilities ( 781)
-------
Net cash flows from operating activities 68
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 273)
Purchases of marketable securities (24)
-------
Net cash flows used in investing activities (297)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings and capital leases (22)
Proceeds on borrowings 247
Net cash flows used in financing activities 225
-------
Net (decrease) increase in cash and cash equivalents (4)
Cash and cash equivalents at beginning of year 171
------
Cash and cash equivalents at end of year $ 167
======
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these statements.
<PAGE>
McBEE SYSTEMS, INC. AND McBEE SYSTEMS OF CANADA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 28, 1998
- ----------------------------------------------------------
1. BASIS OF PRESENTATION
The financial statements for the three months ended March 28, 1998 are
unaudited but reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
statement of the results of the interim period reflected. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. The results of operations for the interim
period reported herein are not necessarily indicative of results to be
expected for the full year.
The financial statements included herein should be read in conjunction with
the financial statements and notes thereto, and the Independent Auditors'
Report included elsewhere in this Form 8-K for McBee Systems, Inc. and McBee
Systems of Canada, Inc (the "Company") for the years ended December 27,1997
And December 28,1996. Reference is made to the accounting policies of the
Company described in the notes to such financial statements. The Company
has consistently followed those policies in preparing these financial
statements.
b) Pro Forma Financial Information
PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
On June 3, 1998, New England Business Service, Inc. (the "Company")
acquired all of the outstanding stock of McBee Systems, Inc. and all of
the assets of McBee Systems of Canada, Inc. (collectively "McBee")for
consideration of approximately $50,400,000 in cash and approximately
$12,600,000 in stock, net of cash acquired.
The following pro forma combined condensed financial statements are
unaudited and have been prepared to give effect to (i) the acquisition of
McBee under the purchase method of accounting, (ii) the arrangements
required to finance such acquisition consisting of a loan to the Company
of $50,150,000 under its revolving line of credit, the issuance of
382,352 shares of stock at an estimated price of approximately $32.95 per
share and application of a previous deposit of $250,000 made with regard
to the transaction and (iii) adjustments based on available information
and upon certain assumptions management believes are reasonable under the
circumstances, as if this transaction had occurred on March 28, 1998 in
the case of the combined condensed balance sheet, or on June 30, 1996 in
the case of the pro forma combined condensed statements of income.
The pro forma information does not purport to be indicative of the
financial position or results of operations that would have been attained
had the transaction occurred on the dates indicated, nor to project the
Company's results of operations for any future period. The pro forma
combined condensed financial statements should be read in conjunction
with the separate audited financial statements and notes thereto of the
Company included in its Form 10-K for the year ended June 28, 1997 and
the audited financial statements and notes thereto of McBee included in
this Form 8-K.
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
March 28, 1998
(Unaudited)
(In Thousands)
<CAPTION>
Pro Forma
NEBS McBee Adjustments Pro Forma
(1) (1) (2)(3) Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,354 $ 167 $ $ 3,521
Short term investments 1,561 407 1,968
Accounts receivable - net 43,451 7,578 51,029
Inventories 18,548 3,533 (707) (f) 21,374
Direct mail advertising and prepaid exps. 11,606 492 (250) (a) 11,848
Deferred income tax benefit 9,581 493 1,463 (c) 11,537
-------- -------- -------- --------
Total current assets 88,101 12,670 506 101,277
Property and Equipment - net 46,725 7,238 (2,271) (e) 51,692
Property Held for Sale 631 631
Goodwill - net 67,784 212 67,996
Other Assets - net 31,938 916 32,854
Excess of Purchase Price over Net Asset Value 50,454 50,454
-------- -------- --------- ---------
TOTAL ASSETS $235,179 $21,036 $ 48,689 $304,904
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 14,310 $ 1,734 625 (d) 16,669
Accrued expenses 25,725 3,203 1,413 (d) 30,341
-------- -------- -------- --------
Total current liabilities 40,035 4,937 2,038 47,010
Revolving Line of Credit 98,000 50,150 (a) 148,150
Deferred Income Taxes 226 100 (100) (c) 226
Long-term Debt 26,772 (26,772) (g) -
STOCKHOLDERS' EQUITY
Common stock 14,750 2,500 (2,118) (b) 15,132
Additional paid-in capital 30,543 584 11,634 (b) 42,761
Cumulative foreign currency translation adj. (1,547) (415) 415 (b) (1,547)
Retained earnings (deficit) 68,626 (13,562) 13,562 (b) 68,626
Unrealized gains on investments 120 (120) (b) -
-------- -------- -------- --------
Total 112,372 (10,773) 23,373 124,972
Less: Treasury stock (15,454) (15,454)
-------- -------- -------- --------
Stockholders' Equity 96,918 (10,773) 23,373 109,518
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $235,179 $ 21,036 $ 48,689 $304,904
======== ======== ========= ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
<TABLE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended June 28, 1997
(unaudited)
(in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma Pro Forma
NEBS Chiswick Rapidforms McBee Adjustments Pro Forma
(1) (1) (1) (4) Combined
-------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $263,424 $ 35,766 $ 85,087 $ 58,905 $ $443,182
OPERATING EXPENSES:
Cost of sales 94,048 20,298 39,732 17,325 171,403
Selling and advertising 90,367 10,304 31,313 28,683 4,160 (a) 164,827
General and administrative 45,949 2,868 9,298 5,984 64,099
Exit costs 3,803 3,803
-------- -------- -------- -------- -------- --------
Total operating expenses 234,167 33,470 80,343 51,992 4,160 404,132
INCOME FROM OPERATIONS 29,257 2,296 4,744 6,913 (4,160) 39,050
OTHER INCOME/(EXPENSE): 2,123 (1,358) (5,537) (3,180) (9) (b) (7,961)
------- -------- -------- -------- -------- --------
INCOME BEFORE TAXES 31,380 938 (793) 3,733 (4,169) 31,089
PROVISION FOR INCOME TAXES 12,731 375 (579) 1,298 (1,668) (c) 12,157
-------- -------- -------- -------- -------- --------
NET INCOME $ 18,649 $ 563 $ (214) 2,435 $ (2,501) $ 18,932
======== ======== ======== ======== ======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share $ 1.39 1.35
======== ========
Diluted Earnings Per Share $ 1.38 1.34
======== ========
BASIC WEIGHTED AVERAGE SHARES
0UTSTANDING 13,397 274 382 14,053
Plus incremental shares from
assumed conversion of stock
options 128 128
-------- -------- -------- --------
DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,525 274 382 14,181
======== ======== ======== ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
<TABLE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended March 28, 1998
(unaudited)
(in thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
NEBS Rapidforms McBee Adjustments Pro Forma
(1) (1) (4)
--------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET SALES $255,268 $ 43,360 $ 46,600 $ $345,228
OPERATING EXPENSES:
Cost of sales 96,906 19,395 13,517 129,818
Selling and advertising 85,782 9,431 22,872 3,120 (a) 121,205
General and administrative 39,637 11,162 4,923 55,722
-------- -------- -------- -------- --------
Total operating expenses 222,325 39,988 41,312 3,120 306,745
INCOME FROM OPERATIONS 32,943 3,372 5,288 (3,120) 38,483
OTHER INCOME/(EXPENSE): (1,943) (2,762) (2,215) (242) (b) (7,162)
-------- -------- -------- -------- --------
INCOME BEFORE TAXES 31,000 610 3,073 (3,362) 31,321
PROVISION FOR INCOME TAXES 12,174 101 1,178 (1,311) (c) 12,142
-------- -------- -------- -------- --------
NET INCOME $ 18,826 $ 509 $ 1,895 $ (2,051) $ 19,179
======== ======== ======== ======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share $ 1.37 1.36
======== ========
Diluted Earnings Per Share 1.35 1.34
======== ========
BASIC WEIGHTED AVERAGE SHARES 0UTSTANDING 13,712 382 14,094
Plus incremental shares from assumed
conversion of stock options 269 269
-------- -------- --------
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 13,981 382 14,363
======== ======== ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE>
Notes to Pro Forma Combined Condensed Financial Statements
1. On June 3, 1998, New England Business Service, Inc. ("NEBS" or the
"Company") acquired from ROMO Corp., a Colorado corporation with its
principal place of business in Lakewood, Colorado, all of the outstanding
common stock of McBee Systems, Inc. and all of the assets of McBee Systems
of Canada, Inc. (collectively "McBee") for consideration of approximately
$50,400,000 in cash and approximately $12,600,000 in stock for an aggregate
purchase price of $63,000,000. The source of the cash component of the
purchase price was a loan made to NEBS in the ordinary course of business
under a revolving line of credit with BankBoston, N.A. and Fleet National
Bank, as lenders and agents thereunder, and certain other financial
institutions.
McBee manufactures and markets a line of checks and related products to
small businesses throughout the United States and Canada through a
dedicated in-house sales force. McBee is headquartered in Parsippany, New
Jersey, and has principal operating facilities in Ohio, Utah, Virginia and
Toronto, Ontario.
The Pro Forma Combined Condensed Balance Sheet has been prepared based on
the Company's March 28, 1998 unaudited consolidated balance sheet and
McBee's unaudited balance sheet as of the same date. The Pro Forma
Combined Consolidated Statements of Income include the Company's historical
results for the applicable periods as previously reported, including the
pro-forma impact of the acquisition of all of the assets and certain
liabilities of Chiswick Trading, Inc. on March 31, 1997 and the acquisition
of all of the outstanding common stock of Rapidforms Inc. on December 23,
1997 and McBee's results for the same periods, derived from management's
internal financial statements.
2. The pro forma adjustments to the Combined Condensed Balance Sheets are
set forth below:
a.) The gross purchase price of $63,000,000 was funded by the issuance
of 382,352 shares of NEBS common stock valued at $12,600,000, and by the
borrowing of approximately $50,150,000 in cash under a five year,
committed, unsecured, revolving line of credit. The balance of $250,000
had been paid previously during the fiscal year in conjunction with the
signing of a revocable letter of intent with regard to the McBee
transaction.
b.) The stockholders' equity amounts of McBee have been eliminated as
required under the purchase method of accounting. However, amounts have
also been added to reflect the above-mentioned issuance of $12,600,000 of
stock.
<PAGE
c.) Historical McBee current and deferred tax balances have been
eliminated, as they were not part of the acquisition. Deferred taxes have
been created based on asset and liability balances established as part of
the acquisition accounting that are treated differently under generally
accepted accounting principles and tax accounting rules.
d.) Estimated transaction costs of $625,000 and certain other
acquisition related liabilities of $1,413,000 have been accrued and added
to the excess of purchase price over the net value of assets acquired.
e.) Fixed assets have been adjusted to reflect estimated fair market
values, resulting in a $2,271,000 reduction in the book value of fixed
assets at the time of acquisition.
f.) Historical inventory balances have been reduced by $707,000 to
reflect the appropriate valuation of inventory as of the acquisition date.
g.) Long-term debt was assumed by McBee's parent company just prior to
the acquisition.
3. For purposes of these pro forma financial statements, the excess of the
purchase price over the net value of acquired assets has been shown as a
single item on the pro forma combined condensed balance sheet. The final
allocation of the excess of purchase price over net assets acquired is
subject to appraisals, evaluations and other studies of the fair value of
McBee's assets and liabilities. When the actual valuations are completed,
value is expected to be ascribed to McBee's customer lists, their tradename
and goodwill, with amortization periods for such intangibles ranging
between 2 and 40 years.
4. The pro forma adjustments to the Combined Consolidated Statements of
Income for the year ended June 28, 1997 and the nine months ended March 28,
1998 are set forth below by line item:
a.) Selling and advertising - to record estimated amortization expense
of the customer list intangible asset (fiscal year 1997 - $3,414,000; nine
months ended 3/28/98 - $2,560,000), to record estimated amortization
expense of the tradename and the acquisition related goodwill assets
(fiscal year 1997 - $746,000; nine months ended 3/28/98 - $560,000)
b.) Other Income/(Expense) - to eliminate interest expense related to
debt obligations not included in the purchase, (fiscal year 1997 -
$2,946,000, nine months ended 3/28/98 - $2,010,000), to eliminate pension
expense related to obligations not included in the purchase (fiscal year
1997 - $241,000; nine months ended 3/28/98 - $150,000), to eliminate
amortization expense on intangibles revalued as part of the purchase
(fiscal year 1997 - $189,000; nine months ended 3/28/98 - $137,000), to
record interest expense at 6.75% on debt required to complete the purchase
based on anticipated balances outstanding (fiscal year 1997 - $3,385,000;
nine months ended 3/28/98 - $2,539,000).
c.) Provision for Income Taxes - to record income taxes at the
effective marginal rate.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Registrant)
June 18, 1998 /s/John F. Fairbanks
- ------------- --------------------
Date John F. Fairbanks
Vice President, Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
3
===========================================================================
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NEW ENGLAND BUSINESS SERVICE, INC.
AND
ROMO CORP.
May 1, 1998
===========================================================================
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into on May 1, 1998, by and among NEW ENGLAND
BUSINESS SERVICE, INC., a Delaware corporation (the "Buyer"), and ROMO
CORP., a Colorado corporation (the "Seller"). The Buyer and the Seller are
referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, the Seller owns all of the issued and outstanding capital
stock of McBee Systems, Inc., a Colorado corporation ("McBee"); and
WHEREAS, McBee produces and sells checks, accounting forms, and other
printed materials; and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all
of such issued and outstanding capital stock of McBee in return for cash
and the Buyer Stock (if any);
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties hereto, intending
to become legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses, determined after taking into consideration
all proceeds of insurance collected by or paid to the Indemnified Party.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" means this Stock Purchase Agreement between the Parties,
as the same may be amended from time to time in accordance with the
provisions of Section 11.09 below.
<PAGE> -1-
"Asset Purchase Agreement" means that certain agreement by and among
the Buyer, the Seller, NEBS Business Forms Ltd. and McBee Canada, dated the
date hereof, by which NEBS Business Forms Ltd. agrees to buy substantially
all of the assets, and assume specified liabilities, of McBee Canada.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that reasonably forms the basis for
any specified consequence.
"Business Day" means any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.
"Buyer" has the meaning set forth in the preface above.
"Buyer Stock" has the meaning set forth in Section 2.02 below.
"Closing" has the meaning set forth in Section 2.03 below.
"Closing Balance Sheet" has the meaning set forth in Section 2.05
below.
"Closing Date" has the meaning set forth in Section 2.03 below.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1986.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Adjusted Net Equity" has the meaning set forth in Section
2.05 below.
"Combined Cash Payment" has the meaning set forth in Section 2.05
below.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" means any information concerning the
businesses and affairs of McBee that is not already generally available to
the public.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Disclosure Schedule" has the meaning set forth in the preamble to
Article III below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c)
<PAGE> -2-
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fair Value" means the average of the closing price of a share of
Buyer Stock for the twenty (20) successive trading days ending on and
including the third trading day preceding the Closing Date, as reported by
the New York Stock Exchange.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Auditor" has the meaning set forth in Section 2.05 below.
"Final Determination" has the meaning set forth in Section 2.05 below.
"Financial Statements" has the meaning set forth in Section 4.07
below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
<PAGE> -3-
"Indemnified Party" has the meaning set forth in Section 8.04 below.
"Indemnifying Party" has the meaning set forth in Section 8.04 below.
"Initial Purchase Price" has the meaning set forth in Section 2.02 below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever
form or medium).
"Interim Balance Sheet" has the meaning set forth in Section 2.05
below.
"Knowledge" means actual knowledge without any implied duty to
investigate.
"Lease Agreement" means the agreement attached hereto as Exhibit G-2.
"Letter of Interest" means that certain letter agreement between the
Parties dated September 30, 1997.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on the
business or financial condition of McBee taken as a whole.
"McBee" has the meaning set forth in the preface above.
"McBee Canada" means McBee Systems of Canada, Inc., an Ontario
corporation.
<PAGE> -4-
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4.07 below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4.07 below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4.07 below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, partnership, limited liability
partnership, corporation, limited liability company, association, joint
stock company, trust, estate, joint venture, unincorporated organization,
or governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Purchased Share" means any share of the common stock, par value $1.00
per share, of McBee.
"Registration Expenses" has the meaning set forth in Section 6.08
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
"Seller" has the meaning set forth in the preface above.
<PAGE> -5-
"Seller Stockholder" means each of the Persons identified on Exhibit B
hereto.
"Seller Stockholders Agreement" means the agreement attached hereto as
Exhibit G-1.
"Seller's Knowledge" means the Knowledge of any of the following
individuals: H. Rex Martin, Abraham M. Zeiderman, Mary Susan Jensen, John
Paukstis, Robert Kane, David Cohen or William Harding.
"Selling Expenses" has the meaning set forth in Section 6.08 below.
"Stockholders' Representative" means the President of the Seller, or
any successor thereto serving in accordance with the Seller Stockholders
Agreement.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.04 below.
"WARN" means the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Section Section 2101-2109, and related regulations.
"Year 2000 Compliant" means that the applicable Person's computer
hardware, software, and other computer or information systems (whether
owned, leased, licensed, or otherwise operated by such Person) will not
terminate operations, malfunction, or otherwise produce any invalid or
incorrect data or information as a result of the input of date data that
includes the year 2000 or later years, or as a result of the passage of
time from the year 1999 to the year 2000.
<PAGE> -6-
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
2.01 Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller,
and the Seller agrees to sell to the Buyer, all of the Purchased Shares,
for the consideration specified below in this Article II.
2.02 Initial Purchase Price. The Buyer agrees to pay to the
Seller at the Closing $58,000,000.00 (the "Initial Purchase Price") as
follows: (i) by delivery, at the Buyer's sole discretion, of either cash
in the amount of $12,600,000, or shares of common stock, $1.00 par value
per share, of the Buyer having an aggregate Fair Value equal to $12,600,000
(the "Buyer Stock"), and (ii) by delivery of cash for the balance of the
Initial Purchase Price payable by wire transfer or delivery of other
immediately available funds, after giving credit for the $250,000 deposit
previously made by the Buyer to the Seller upon execution of the Letter of
Interest and to be retained by the Seller upon the Closing hereof.
2.03 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hill &
Barlow in Boston, Massachusetts, commencing at 9:00 a.m. local time on May
22, 1998, or, if later, but subject to the provisions of Section 10.01
below, the third Business Day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself), or such other date as
the Buyer and the Seller may mutually determine (the "Closing Date").
2.04 Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 7.01 below, (ii) the Buyer will deliver to
the Seller the various certificates, instruments, and documents referred to
in Section 7.02 below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of the Purchased Shares, if any, endorsed in
blank or accompanied by duly executed assignment documents, and (iv) the
Buyer will deliver to the Seller the consideration specified in Section
2.02 above.
2.05 Adjustments to Initial Purchase Price. The Initial Purchase
Price payable hereunder and under the Asset Purchase Agreement (the
"Combined Cash Payment") shall be subject to adjustment after the Closing
Date as follows:
(a) Following the Closing Date, the Buyer shall prepare a balance
sheet for each of McBee and McBee Canada, together with a combined balance
sheet for McBee and McBee Canada, for the period ended on the Closing Date
(such combined balance sheet to be referred to as the "Closing Balance
Sheet"), prepared in accordance with GAAP (excluding footnote requirements)
reflecting consistent methodology and practices regarding the establishment
of balance sheet reserves and liabilities and in a manner
<PAGE> -7-
consistent with the August 23, 1997 separate and combined balance sheets of
McBee and McBee Canada (included on Exhibit A hereto) (such combined
balance sheet to be referred to as the "Interim Balance Sheet"), together
with a schedule computing Combined Adjusted Net Equity (as defined below)
based upon the Closing Balance Sheet. Following the preparation of the
Closing Balance Sheet and the computation of Combined Adjusted Net Equity,
which Buyer shall use its commercially reasonable efforts to complete
within 45 calendar days after the Closing Date, the Buyer shall deliver to
the Seller a true and complete copy of such Closing Balance Sheet and
computation of Combined Adjusted Net Equity. The Buyer shall permit the
Seller to review all work papers and computations used by the Buyer in
preparing such Closing Balance Sheet and in computing such Combined
Adjusted Net Equity. Within twenty-one (21) calendar days following the
date of delivery of such Closing Balance Sheet to the Seller, the Seller
shall either accept the Closing Balance Sheet and Combined Adjusted Net
Equity based thereon, or shall propose adjustments thereto; provided that
if the Seller does not propose adjustments within such 21-day period, the
Seller shall be deemed to have accepted the Closing Balance Sheet and
Combined Adjusted Net Equity based thereon. If the Seller accepts (or is
seemed to have accepted) the Closing Balance Sheet and Combined Adjusted
Net Equity based thereon, such determination of Combined Adjusted Net
Equity shall become the "Final Determination". If the Seller shall propose
adjustments to Combined Adjusted Net Equity, and should the Buyer and the
Seller fail to agree on all of the Seller's proposed adjustments within ten
(10) Business Days following the date of delivery by the Seller of notice
of such proposed adjustments, the Parties shall request Price Waterhouse
LLP or, in the event that such firm is unavailable to accept this
assignment, such other nationally recognized firm of auditors as the
Parties mutually agree (the "Final Auditor") to prepare and deliver to the
Buyer and the Seller (i) a final Closing Balance Sheet in accordance with
the terms hereof, adjusting only items in dispute between the Buyer and the
Seller, and (ii) the Final Determination of the Combined Adjusted Net
Equity of McBee on the Closing Date as reflected in such final Closing
Balance Sheet, which Final Determination shall be binding upon the Buyer
and the Seller. Fees for the services of the Final Auditor shall be paid
equally by the Buyer and the Seller.
(b) Upon Final Determination, if the amount of the Final
Determination is less than $15,597,678 (such amount representing Combined
Adjusted Net Equity as reflected in the Interim Balance Sheet), the
Combined Cash Payment shall thereupon be reduced dollar for dollar to the
extent that the Combined Adjusted Net Equity on the Closing Date as so
finally determined is less than $15,597,678, and the Seller shall
immediately remit to the Buyer the amount of such deficiency by wire
transfer in immediately available funds to a bank account designated in
writing by the Buyer.
(c) For purposes of this Section 2.05, "Combined Adjusted Net
Equity" shall mean the sum, after eliminations, of McBee's and McBee
Canada's (i) total stockholders' equity and (ii) payables to the Seller
(including long-term note payable, income taxes
<PAGE> -8-
payable and deferred tax liabilities and all tax liabilities of McBee
Canada accrued on the Closing Balance Sheet and not assumed by NEBS
Business Forms Ltd. under the Asset Agreement), less (iii) the sum of
receivables from the Seller (including income tax assets, deferred tax
assets and all tax assets of McBee Canada included on the Closing Balance
Sheet but not purchased by NEBS Business Forms Ltd. under the Asset
Agreement); where all such terms refer to amounts categorized and
determined consistently with the Interim Balance Sheet, as adjusted in
accordance with Section 2.05(a).
2.06 Intercompany Obligations. Upon consummation of the Closing, all
of McBee's payables to the Seller and receivables from the Seller,
including without limitation with respect to income tax obligations or
assets of the Seller, shall be cancelled and be of no further force and
effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3.01 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.01), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof
(the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
sections corresponding to the lettered and numbered sections in this
Agreement which require the disclosure. Any matter disclosed in one
section of the Disclosure Schedule may be cross-referenced in other
sections of the Disclosure Schedule, and upon such cross-referencing shall
be deemed disclosed for all purposes of the section of the Disclosure
Schedule in which such cross-reference is contained to the extent (i) this
Agreement requires such disclosure and (ii) the relevance and significance
of such disclosure is evident from such disclosure or cross-reference.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Colorado.
(b) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and the documents and
certificates delivered in connection herewith and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms.
The Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement, other than the filings required by the Hart-Scott-Rodino Act.
<PAGE> -9-
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is
subject, or any provision of the Seller's charter or bylaws, or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the
Seller is a party or by which it is bound or to which any of its assets is
subject.
(d) Brokers' Fees. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer or
McBee could become liable or obligated.
(e) Seller Stockholders. The Persons identified on Exhibit B
hereto are residents of the states indicated on such Exhibit B and own
beneficially all of the issued and outstanding shares of capital stock of
the Seller in the amounts set forth therein.
(f) Stockholders' Representative. Each of the Seller Stockholders
has duly, validly and irrevocably appointed the President of the Seller as
the Stockholder's Representative by means of an enforceable general power
of attorney coupled with an interest, with full power of substitution, and
in accordance with such appointment the Stockholders' Representative has
the full power and authority to execute and deliver any amendments,
modifications or waivers of the Seller Stockholders Agreement on behalf of
each such Seller Stockholder, and in connection therewith to dispute or
refrain from disputing, negotiate and compromise, execute any settlement
agreement or release or other document in connection with any dispute, or
otherwise take any action in connection with such agreements as the
Stockholders' Representative shall in its sole discretion determine to be
appropriate. The Buyer and its representatives may rely on the authority
of the Stockholders' Representative in respect of any action taken by it,
without any liability to, or obligation to inquire of, any of the Seller
Stockholders, notwithstanding any notice to the contrary by any Seller
Stockholder after the date hereof.
(g) Investment. The Seller (i) understands that the Buyer Stock
has not been registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii)
is acquiring the Buyer Stock solely for its own account for investment
purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning the
Buyer and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding
the Buyer Stock, (v) is able to bear the economic risk inherent in holding
the Buyer Stock, and (vi) is an Accredited Investor.
<PAGE> -10-
(h) Purchased Shares. The Seller holds of record and owns
beneficially all of the Purchased Shares, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of McBee (other than
this Agreement).
3.02 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3.02 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.02).
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and the documents and
certificates delivered in connection herewith and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable in accordance with its terms
and conditions. The Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement, other than the filings required by the Hart-Scott-Rodino
Act.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject,
except that the consent of the Buyer's lender is required.
(d) Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
<PAGE> -11-
(e) Investment. The Buyer is not acquiring the Purchased Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(f) Financial Statements. Attached hereto as Exhibit C are the
following financial statements of the Buyer: (i) audited balance sheets
and statements of income, stockholders' equity, and cash flow as of and for
the fiscal years ended June 30, 1995, June 29, 1996 and June 28, 1997; and
(ii) an unaudited balance sheet and statement of income and cash flow as of
and for the period ended March 28, 1998. The financial statements attached
hereto as Exhibit C (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
covered thereby, present fairly the financial condition of the Buyer as of
such dates and the results of operations of the Buyer for such periods and
are correct and complete; provided, however, that the unaudited financial
statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
(g) Capitalization of Buyer. As of April 30, 1998, the Buyer had
duly authorized 40 million shares of common stock, $1.00 par value per
share, of which 13,845,797 shares were issued and outstanding and 2,756,610
shares were reserved for issuance for various corporate purposes, and
1,000,000 shares of preferred stock, $1.00 par value per share, none of
which was issued and outstanding.
(h) Buyer Stock. The shares of Buyer Stock to be issued to the
Seller hereunder will, when so issued, be duly authorized, validly issued
and outstanding and fully paid and non-assessable.
(i) Buyer SEC Reports. The Buyer has previously furnished the
Seller and the Seller Stockholders with true and complete copies of the
Buyer's Annual Report on Form 10-K for the year ended June 28, 1997, its
proxy statement for the Annual Meeting of Stockholders held October 24,
1997, all communications mailed by the Buyer to its stockholders since June
28, 1997, and all Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed after June 29, 1997. The financial statements and schedules
of the Buyer contained in said reports (or incorporated therein by
reference) were prepared in accordance with GAAP applied on a consistent
basis except as noted therein, and fairly present the information purposed
to be shown therein. Such proxy statement and stockholder communications,
Annual Report on Form 10-K, Current Reports on Form 8-K, and Quarterly
Reports on Form 10-Q did not, on the date of mailing in the case of such
proxy statement and stockholder communications, and on the date of filing
in the case of such reports, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Buyer has timely filed all
proxy statements, Annual Reports on Form 10-K,
<PAGE> -12-
Current Reports on Form 8-K, Quarterly Reports on Form 10-Q, and other
statements and reports required to be filed under the Securities Act and
the Securities Exchange Act of 1934, as amended, and as of their respective
dates all such statements and reports complied in all material respects
with the published rules and regulations of the Commission with respect
thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING McBEE
The Seller represents and warrants to the Buyer that the statements
contained in this Article IV are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article IV), except as set forth in
the Disclosure Schedule.
4.01 Organization, Qualification, and Corporate Power. McBee is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Colorado. McBee is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where
such qualification is required. Each jurisdiction in which McBee is
authorized to conduct business is identified in Section 4.01 of the
Disclosure Schedule. McBee has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and in which it presently proposes to engage and to
own and use the properties owned and used by it. Section 4.01 of the
Disclosure Schedule lists the directors and officers of McBee. The Seller
has delivered to the Buyer correct and complete copies of the charter and
bylaws of McBee (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of McBee are correct and complete. McBee is not in
default under or in violation of any provision of its charter or bylaws.
4.02 Capitalization. The entire authorized capital stock of McBee
consists of 100,000 shares of common stock, par value $0.01 per share, of
which 50,000 shares are issued and outstanding and no shares are held in
treasury. All of the Purchased Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by
the Seller. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or other contracts or commitments that could require McBee to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to McBee. There are no
voting trusts, proxies, or other agreements or understandings with respect
to the voting of the capital stock of McBee.
4.03 Noncontravention. Neither the execution and the delivery of
this Agreement or any other document or certificate executed and delivered
in connection herewith, nor the
<PAGE> -13-
consummation of the transactions contemplated hereby or thereby, upon and
subject to compliance with the Hart-Scott-Rodino Act, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which McBee is subject or any provision of
the charter or bylaws of McBee, or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require
any notice under, any agreement, contract, lease, license, instrument, or
other arrangement to which McBee is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Neither the Seller nor McBee
needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated
by this Agreement.
4.04 Brokers' Fees. McBee has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
4.05 Title to Assets. McBee has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Most Recent Balance Sheet
(including such items as have been fully expensed) or acquired after the
date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Balance Sheet.
4.06 Subsidiaries. McBee has no subsidiaries and does not own,
directly or indirectly, any of the capital stock or beneficial interest of
any Person.
4.07 Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"):
(i) audited combined balance sheets and statements of income, shareholders'
investment and cash flows as of and for the fiscal years ended December 28,
1996 and December 27, 1997 (the "Most Recent Fiscal Year End") for McBee;
(ii) unaudited separate and combined balance sheets and statements of
income, shareholders' investment and cash flows (the "Most Recent Financial
Statements") as of and for the three months ended March 28, 1998 (the "Most
Recent Fiscal Month End") for McBee; and (iii) the unaudited Interim
Balance Sheet. The Financial Statements (including the notes thereto)
present fairly the financial position of McBee as of such dates and the
results of operations of McBee for such periods in conformity with GAAP;
provided, however, that the Most Recent Financial Statements are subject to
normal year-end adjustments (which will not, as they relate to periods
prior to March 28, 1998, be material individually or in the aggregate) and
lack footnotes and other presentation items.
<PAGE> -14-
4.08 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of McBee. Without limiting the generality of the
foregoing, since that date:
(a) McBee has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than (i) in the Ordinary Course of
Business, (ii) where any such transaction was with an Affiliate of McBee,
for a fair consideration, and (iii) transactions which are, singly and in
the aggregate, immaterial;
(b) McBee has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $250,000 or outside the Ordinary Course of
Business or, in the case of any such transaction with an Affiliate, other
than for a fair consideration;
(c) no party (including McBee) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) involving more than
$250,000 to which McBee is a party or by which it is bound;
(d) McBee has not imposed any Security Interest upon any of its
assets, tangible or intangible;
(e) McBee has not made any capital expenditure (or series of
related capital expenditures) either involving more than $250,000 or
outside the Ordinary Course of Business;
(f) McBee has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either involving
more than $100,000 or outside the Ordinary Course of Business;
(g) McBee has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligations involving more than $100,000 singly
or $250,000 in the aggregate (other than indebtedness for money borrowed
from the Seller, consistent with past practices);
(h) McBee has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
<PAGE> -15-
(i) McBee has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $100,000 or outside the Ordinary Course of Business;
(j) McBee has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the charter or
bylaws of McBee;
(l) McBee has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(m) McBee has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(n) McBee has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(o) McBee has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business, and McBee has not engaged in any transaction
which gives rise to an intercompany obligation between McBee and the Seller
or any of the Seller's Affiliates (other than payables to and receivables
from the Seller which shall be cancelled at the Closing in accordance with
Section 2.06 above);
(p) McBee has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q) McBee has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(r) McBee has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
(s) McBee has not made any other change in employment terms for
any of its directors, officers, and employees outside the Ordinary Course
of Business;
<PAGE> -16-
(t) McBee has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(u) to Seller's Knowledge, except as expressly contemplated by
this Agreement or the Disclosure Schedule, there has not been any other
occurrence, event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving McBee; and
(v) McBee has not committed to any of the foregoing.
4.09 Undisclosed Liabilities. McBee has no Liability which must
be shown on the face of a balance sheet prepared in accordance with GAAP
(and to the Seller's Knowledge there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against any of them giving rise to such Liability), except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto), and (ii) Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
4.10 Legal Compliance. Each of McBee and its Affiliates for whose
actions McBee may be responsible has complied in all material respects with
all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), including specifically all laws governing the escheat of
unclaimed property, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply.
Notwithstanding the information set forth in Section 4.10 of the Disclosure
Schedule, the escheat obligations of McBee and its Affiliates for whose
actions McBee may be responsible do not exceed the accruals therefor.
4.11 Tax Matters.
(a) McBee has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all material respects.
All Taxes owed by McBee (whether or not shown on any Tax Return) have been
paid or accrued. McBee is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by
an authority in a jurisdiction where McBee does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of McBee that arose in connection
with any failure (or alleged failure) to pay any Tax.
<PAGE> -17-
(b) McBee has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability of
McBee either (i) claimed or raised by any authority in writing or (ii) to
Seller's Knowledge or the Knowledge of any employee of the Seller or McBee
with functional responsibility for Tax matters, based upon personal contact
with any agent of such authority. Section 4.11 of the Disclosure Schedule
lists all federal, state, local, and foreign income Tax Returns filed with
respect to McBee for taxable periods ended on or after December 31, 1993,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Seller (with respect to McBee) since December 31, 1993.
(d) McBee has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) McBee has not filed a consent under Code Section 341(f)
concerning collapsible corporations. McBee has not made any payments, is
not obligated to make any payments, nor is McBee a party to any agreement
that under certain circumstances could obligate it to make any payments,
that will not be deductible under Code Section 280G. McBee has not been a
United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). McBee has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662. McBee is not a party to any Tax allocation or sharing agreement.
McBee (i) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Seller) or (ii) has no Liability for the Taxes of
any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(f) The unpaid Taxes of McBee (i) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) do not exceed
that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of McBee in filing its Tax
Returns.
<PAGE> -18-
4.12 Real Property.
(a) Section 4.12(a) of the Disclosure Schedule lists and describes
briefly all real property that McBee owns. With respect to each such
parcel of owned real property:
(i) McBee has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for installments of special assessments not yet
delinquent and recorded easements, covenants, and other restrictions which
do not impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(ii) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting adversely the current use,
occupancy, or value thereof;
(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not serve any
adjoining property for any purpose inconsistent with the use of the land,
and the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and have been operated and maintained in
all material respects in accordance with applicable laws, rules, and
regulations;
(v) there are no material leases, subleases, licenses, or other
agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
(vi) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein;
(vii) there are no parties (other than McBee) in possession of the
parcel of real property;
<PAGE> -19-
(viii) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
(ix) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of real
property, and access to the property is provided by paved public right-of-
way with adequate curb cuts available.
(b) Section 4.12(b) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to McBee. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) listed in Section 4.12(b) of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 4.12(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding and enforceable
against McBee and, to Seller's Knowledge, against any third parties
thereto, and is in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding and enforceable against McBee and, to Seller's Knowledge, against
any third parties thereto, and will continue to be in full force and effect
on identical terms following the consummation of the transactions
contemplated hereby;
(iii) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or acceleration thereunder;
(iv) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the lease or sublease has repudiated any provision thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
<PAGE> -20-
(vii) McBee has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in all material respects in accordance with applicable laws,
rules, and regulations; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities, and each such facility abuts on and has direct vehicular access
to a public road, or has access to a public road via a permanent,
irrevocable appurtenant easement benefiting the owner of such facility, and
access to each such facility is provided by paved public right-of-way with
adequate curb cuts available.
4.13 Intellectual Property.
(a) McBee has the sole and exclusive right to use the name "McBee
Systems."
(b) Except where failure to do so would not result, either
individually or in the aggregate, in a Material Adverse Effect, McBee owns
or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by McBee immediately prior
to the Closing hereunder will be owned or available for use by McBee on
identical terms and conditions immediately subsequent to the Closing
hereunder. McBee has taken all commercially reasonable action to maintain
and protect each item of Intellectual Property that it owns or uses.
(c) McBee has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Seller and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of McBee has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that McBee must license or refrain from
using any Intellectual Property rights of any third party) which has not
been finally resolved. To the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of McBee, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of McBee.
<PAGE> -21-
(d) Section 4.13(d) of the Disclosure Schedule identifies each
patent, copyright and trademark registration which has been issued to McBee
with respect to any of its Intellectual Property, identifies each pending
patent, copyright or trademark application or application for registration
which McBee has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which McBee has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Seller has delivered to the Buyer
correct and complete copies of all such patents, trademark or copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section 4.13(d) of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by McBee in connection with its business. With respect to
each item of Intellectual Property required to be identified in Section
4.13(d) of the Disclosure Schedule:
(i) McBee possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
(iv) McBee has never agreed to indemnify any Person for or against
any interference, infringement, misappropriation, or other conflict with
respect to the item.
(e) Section 4.13(e) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that McBee uses
pursuant to license, sublicense, agreement, or permission, including
specifically any item of such Intellectual Property owned by any Affiliate
of McBee. The Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in Section 4.13(e) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
<PAGE> -22-
(iii) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) neither McBee nor, to McBee's or the Seller's Knowledge, any
other party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii) McBee has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(f) Section 4.13(f) of the Disclosure Schedule sets forth in
detail (i) McBee's current status with respect to becoming Year 2000
Compliant (including, without limitation, a list of compliant and non-
compliant software currently used by McBee), (ii) the remedial actions
being taken and planned to be taken by McBee to become Year 2000 Compliant,
and (iii) the estimated person-hours and costs, and the personnel and
resources, expected to be associated with taking the actions described in
clause (ii). To the Seller's Knowledge and reasonable belief, and to the
Knowledge and reasonable belief of any employee of the Seller or McBee with
functional responsibility for Year 2000 compliance matters, the remedial
actions described pursuant to clause (ii) above are sufficient to cause
McBee to become Year 2000 Compliant to the extent necessary to carry on its
business on and after January 1, 2000 as such business is presently
conducted.
4.14 Tangible Assets. The buildings, machinery, equipment, and
other tangible assets owned or leased by McBee are reasonably sufficient
for the conduct of McBee's businesses as presently conducted. To Seller's
Knowledge, each such tangible asset is in reasonably good operating
condition and repair (subject to normal wear and tear).
<PAGE> -23-
4.15 Inventory. McBee's inventory consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods reasonably expected to be used in the Ordinary Course of Business,
subject only to the reserve for inventory write-down as reflected in the
Most Recent Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with GAAP.
4.16 Contracts. Section 4.16 of the Disclosure Schedule lists the
following contracts and other agreements to which McBee is a party:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $100,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, or
involve consideration in excess of $200,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $50,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or noncompetition, or
which otherwise restricts in any material manner the free use by McBee of
its assets or data made available to it in the Ordinary Course of Business;
(f) any agreement with any of the Seller, any Seller Stockholder,
or any Affiliates thereof (other than McBee);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of McBee's current or former directors,
officers, and employees, or for which McBee may otherwise be solely or
jointly liable;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation
in excess of $50,000 or providing severance benefits;
<PAGE> -24-
(j) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of McBee;
(l) all contracts to which the Seller or its Affiliates (other
than McBee) is a party and which provides a material benefit or detriment
to McBee; and
(m) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $200,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in Section 4.16 of the
Disclosure Schedule. With respect to each agreement required to be
identified in Section 4.16 of the Disclosure Schedule: (w) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (x) the
agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (y) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration,
under the agreement; and (z) neither the Seller nor McBee nor, to McBee's
or the Seller's Knowledge, any other party has repudiated any provision of
the agreement.
4.17 Notes and Accounts Receivable. All notes and accounts
receivable of McBee are reflected properly on its books and records, and
are receivables incurred in the Ordinary Course of Business, subject only
to the reserve for bad debts and returns and allowances reflected in the
Most Recent Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with GAAP.
4.18 Powers of Attorney and Banking Matters. There are no
outstanding powers of attorney executed on behalf of McBee. Section 4.18
of the Disclosure Schedule sets forth and describes all arrangements which
McBee has with any banking institution, and identifies the Person or
Persons authorized to make deposits, withdrawals, or otherwise take actions
in respect thereof.
4.19 Insurance. Section 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, automobile, casualty, liability,
umbrella, and workers' compensation coverage and bond and surety
arrangements) to which McBee has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since July 1, 1993:
(a) the name, address, and telephone number of the agent;
<PAGE> -25-
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the general type of coverage (including an indication of
whether the coverage was on a claims made, occurrence, or other basis) and
amount (including any deductibles and ceilings) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each insurance policy required to be disclosed in Section
4.19 of the Disclosure Schedule: (i) the policy is legal, valid, binding,
and enforceable by and in favor of McBee, and in full force and effect;
(ii) the policy will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, and will provide coverage to McBee
following the Closing Date for claims relating to the period prior to the
Closing Date; (iii) neither the Seller nor McBee nor, to McBee's or the
Seller's Knowledge, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the
policy has repudiated any provision thereof. Section 4.19 of the
Disclosure Schedule describes any self-insurance or co-insurance
arrangements affecting McBee.
4.20 Litigation. Section 4.20 of the Disclosure Schedule sets
forth each instance in which McBee (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge, or (ii) to McBee's
or the Seller's Knowledge, is a party or is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
4.21 Product Warranty. To Seller's Knowledge, each product
manufactured, sold, leased, or delivered by McBee has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and McBee has no Liability for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for
product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with McBee's past custom and
practice. Section 4.21 of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for McBee (containing
applicable guaranty, warranty, and indemnity provisions).
<PAGE> -26-
4.22 Product Liability. To McBee's and the Seller's Knowledge,
McBee has no Liability arising out of any injury to individuals or property
as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by McBee.
4.23 Employees. To the Seller's Knowledge, and to the Knowledge
of any employee of the Seller or McBee with functional responsibility for
employment matters, no executive, key employee, or group of employees has
any plans to terminate employment with McBee. McBee is not a party to or
bound by any collective bargaining agreement, nor has McBee experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. McBee has not committed any unfair labor practice.
None of the Seller and the directors and officers (and employees with
responsibility for employment matters) of McBee has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of McBee.
4.24 Employee Benefits.
(a) Section 4.24 of the Disclosure Schedule lists each Employee
Benefit Plan that either of the Seller or McBee maintains or to which McBee
contributes, and in which employees or former employees of McBee
participates.
(i) Each Employee Benefit Plan required to be listed in Section
4.24 of the Disclosure Schedule (and each related trust, insurance
contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(ii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B
of Title 1 of ERISA and of Code Section 4980B have been met with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
and all contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each such Employee Pension Benefit
Plan or accrued in accordance with McBee's past custom and practice. All
premiums or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
<PAGE> -27-
(iv) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
Section 401(a).
(v) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan equals or exceeds the
present value of all vested and nonvested Liabilities thereunder determined
in accordance with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for determination.
(vi) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
(b) With respect to each Employee Benefit Plan that McBee and the
Controlled Group of Corporations which includes McBee maintains or ever has
maintained or to which any of them contributes, ever has contributed, or
ever has been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(ii) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to
McBee's or the Seller's Knowledge, threatened. None of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of McBee and its Subsidiaries has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or investigation.
(iii) McBee has not incurred, and none of the Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of McBee has any reason to expect that McBee will incur,
any Liability to the PBGC
<PAGE> -28-
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension Benefit Plan.
(c) Neither McBee nor any member of the Controlled Group of
Corporations that includes McBee contributes to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or has
any Liability (including withdrawal Liability) under any Multiemployer
Plan.
(d) McBee neither maintains nor ever has maintained nor
contributes, nor ever has contributed, nor ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health,
or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other
than in accordance with Code Section 4980B).
4.25 Guaranties. McBee is not a guarantor or co-borrower in
respect of any Liability or obligation and is not otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
4.26 Environment, Health, and Safety.
(a) Each of McBee and its predecessors and Affiliates has complied
with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure
so to comply. Without limiting the generality of the preceding sentence,
each of McBee and its predecessors and Affiliates has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(b) McBee and its Subsidiaries have no Liability for damage to any
site, location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(c) There are no underground storage tanks on any premises owned
by or leased to McBee.
(d) All properties and equipment used in the business of McBee,
its predecessors and Affiliates have been free of PCBs, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
Extremely
<PAGE> -29-
Hazardous Substances and, to the Seller's Knowledge and the Knowledge of
employees of the Seller and McBee with functional responsibility for
environmental matters, asbestos which is friable or otherwise requires
removal or notification of any hazard to any Person.
4.27 Certain Business Relationships with McBee. None of the
Seller and its Affiliates (other than McBee) are involved in any business
arrangement or relationship with McBee, the continuation of which is
material to the business and operations of McBee, and none of the Seller
and its Affiliates (other than McBee) owns any asset, tangible or
intangible, which is used in the business of McBee and is material to the
business and operations of McBee. There are no intercompany obligations
between McBee and the Seller or any of the Seller's Affiliates, other than
(i) payables to and receivables from the Seller which shall be cancelled at
the Closing in accordance with Section 2.06 above, and (ii) rent accrued in
respect of the property which is the subject of the Lease Agreement.
4.28 Disclosure. The representations and warranties contained in
this Article IV do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this Article IV not misleading.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.01 General. Each of the Parties will use its commercially
reasonable efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but
not waiver, of the closing conditions set forth in Article VII below).
5.02 Notices and Consents. The Seller will cause McBee to give
any notices to third parties, and will cause McBee to use its commercially
reasonable efforts to obtain any third party consents, that the Buyer may
request in connection with the matters referred to in Section 4.03 above.
Each of the Parties will (and the Seller will cause McBee to) give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3.01(b),
Section 3.02(b), and Section 4.03 above. Without limiting the generality of
the foregoing, each of the Parties will file (and the Seller will cause
McBee to file) any Notification and Report Forms and related material that
it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use its best efforts to obtain (and the Seller
will cause McBee to use its best efforts to obtain) an early termination of
the applicable waiting period, and will make
<PAGE> -30-
(and the Seller will cause McBee to make) any further filings pursuant
thereto that may be necessary, proper, or advisable in connection
therewith.
5.03 Operation of Business. The Seller will cause McBee to
conduct its operations in the Ordinary Course of Business and not cause or
permit McBee to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Seller will not cause or permit McBee to
engage in any practice, take any action, or enter into any transaction of
the sort described in Section 4.08 above.
5.04 Preservation of Business. The Seller will cause McBee to use
commercially reasonably efforts to keep its business and properties
substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
5.05 Full Access. The Seller will permit, and the Seller will
cause McBee to permit, representatives of the Buyer and its lenders to have
full access to all premises, properties (including subsurface testing),
personnel, books, records (including Tax records), contracts, and other
documents and data, of or pertaining to McBee. McBee will provide the
Buyer with such copies of such documents as the Buyer shall reasonably
request. Until such time as a Closing occurs hereunder, the Buyer will
treat and hold as such any Confidential Information it receives from any of
the Seller and McBee in the course of the reviews contemplated by this
Section 5.05, will not use any of the Confidential Information except in
connection with this Agreement, and if this Agreement is terminated for any
reason whatsoever, will return to the Seller or McBee, as the case may be,
all tangible embodiments (and all copies) of the Confidential Information
which are in its possession.
5.06 Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development causing a breach of
any of the representations and warranties in Article IV above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of its own representations and
warranties in Article III above. No disclosure by any Party pursuant to
this Section 5.06, however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.07 Exclusivity. The Seller will not (and the Seller will not
cause or permit McBee or any Seller Shareholder to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, McBee (including
any acquisition structured as a merger, consolidation, or share exchange)
or (ii) participate in any discussions or negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or seek any of
the foregoing. The Seller will not vote in favor of any such acquisition
structured as a merger, consolidation, or share exchange. The
<PAGE> -31-
Seller will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
5.08 Employee Benefit Plans. The arrangements of the Seller and the
Buyer in respect of McBee's Employee Benefit Plans are described in Exhibit
J hereto. As contemplated therein, the Seller will take the following
actions before the Closing Date in respect of the Employee Benefit Plans
described below:
(a) Employee Welfare Benefit Plans. All plans, provisions,
assets (including insurance policies) and Liabilities of Employee Welfare
Benefit Plans covering active employees of McBee, and former employees of
McBee to the extent McBee has any continuing obligations to such employees
under COBRA, will be transferred to McBee, as set forth in Exhibit J.
(b) Employee Pension Benefit Plans. The ROMO Corp. Savings
Plus Plan will be adopted by McBee as the sole sponsoring employer, and
account balances relating to participants who are not or were not, prior to
termination of their employment, employees of McBee, will be transferred
out of the Plan. The ROMO Corp. Employees' Retirement Plan will be
retained by the Seller. Any obligations to pay deferred compensation to
current employees of McBee will be transferred by the Seller to McBee as
described in Exhibit J, together with assets sufficient to fund such
obligations, the determination of such sufficiency to be based upon the
assumptions set forth in Exhibit J.
(c) Other Employee Benefit Plans. The Seller will retain all
Liabilities relating to plans providing postretirement medical benefits and
postemployment benefits to prior employees of McBee and its Affiliates.
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
6.01 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to McBee.
<PAGE> -32-
6.02 Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement, or
(ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving McBee, each of the
other Parties will cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article VIII below).
6.03 Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licenser, customer, supplier, or other business associate of McBee from
maintaining the same business relationships with McBee after the Closing as
it maintained with McBee prior to the Closing.
6.04 Confidentiality. For a period of three years from and after
the Closing Date, the Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in its possession. In the event that the Seller is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Seller will
notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the
provisions of this Section 6.04. If, in the absence of a protective order
or the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the Seller shall use
its best efforts to obtain, at the request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate.
6.05 Covenant Not to Compete. For a period of three years from
and after the Closing Date, the Seller will not engage directly or
indirectly in any business that McBee conducts as of the Closing Date in
any geographic area in which McBee conducts that business as of the Closing
Date; provided, however, that no owner of less than 1% of the outstanding
stock of any publicly traded corporation shall be deemed to engage solely
by reason thereof in any of its businesses. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
Section 6.05 is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable
<PAGE> -33-
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
6.06 Use of Intellectual Property. The Seller acknowledges and
agrees that as a result of the consummation of the transaction contemplated
hereby, the Buyer is acquiring the exclusive right to use the Intellectual
Property owned or used by McBee immediately prior to the Closing Date,
including the names "McBee" and "McBee Systems", for which the Seller will
receive full and adequate consideration, and that neither the Seller nor
any Affiliate of the Seller will use such Intellectual Property or such
names or any similar names subsequent to the Closing. Immediately
following the Closing the Seller will cause McBee Color Express to change
its name to "USA Color Express."
6.07 Buyer Stock. Each certificate for Buyer Stock will be
imprinted with a legend substantially in the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED TO ANY PERSON
OTHER THAN A SELLER STOCKHOLDER UPON LIQUIDATION OF THE SELLER UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL, ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT
OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
No share of Buyer Stock may be pledged, hypothecated, sold, or otherwise
transferred without (i) an effective registration statement for such share
under the Securities Act and applicable state securities laws or (ii) an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Buyer and its counsel, that registration is not
required under the Securities Act or under any applicable state securities
laws.
6.08 Registration of the Buyer Common Stock.
(a) Registration Procedures and Expenses. The Buyer shall use all
reasonable efforts to effect the registration of the shares of Buyer Common
Stock issued to the Seller hereunder under and in compliance with the
Securities Act for sale as expeditiously as reasonably possible following
the Closing by performing the following:
(i) Following the Closing, the Buyer shall prepare and file with
the Commission a registration statement on Form S-3 with respect to the
shares of Buyer Stock issued to the Seller hereunder and use
<PAGE> -34-
commercially reasonable efforts to cause such registration statement to
become effective within forty-five (45) days following the Closing and to
remain effective for a period of two years from the Closing Date (or such
shorter period as the Seller Stockholders and the Buyer may agree) and
shall take such action as is necessary under applicable state securities
laws to permit the sale of such shares of the Buyer Stock thereunder. The
Seller's and each Seller Stockholder's plan of distribution with respect to
such shares of the Buyer Stock shall be as follows: (a) sale of shares
from time to time by the Seller, any Seller Stockholder or by pledgees,
donors, transferees or other successors in interest; (b) a block trade in
which the broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (c) purchases by a broker or dealer as
principal and resale by such broker or dealer for its own account, (d)
regular brokerage transactions executed on the New York Stock Exchange, (e)
negotiated transactions effected at such prices as may be obtainable and as
may be satisfactory to a Seller Stockholder, or (f) other means. If the
Securities Act requires that such registration statement or the prospectus
forming a part thereof be amended or supplemented in order to properly
reflect the Seller Stockholder's plan of distribution, the Seller
Stockholder will promptly notify the Buyer of such matters and cooperate
with the Buyer in effecting such amendment or supplement. If any Seller
Stockholder transfers any shares of the Buyer Stock to a broker or dealer,
he shall advise such transferee of the fact that the shares are sold or to
be sold pursuant to such registration statement and of the provisions of
this Section 6.08. The registration statement shall permit delayed or
continuous offerings pursuant to Rule 415 under the Securities Act until
the expiration of the period set forth above.
(ii) The Buyer shall prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to update and
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of all securities
covered by such registration statement. Notwithstanding anything else to
the contrary contained herein, the Buyer shall not be required to disclose
any confidential information concerning pending acquisitions or other
material information not otherwise required to be disclosed.
<PAGE> -35-
(iii) The Buyer shall furnish to each Seller Stockholder such
number of copies of the registration statement, each amendment and
supplement thereto, the prospectus included in the registration statement
(including each preliminary prospectus and each amendment or supplement
thereto), and such other publicly-available documents such Seller
Stockholder may reasonably request in order to facilitate the disposition
of the shares of Buyer Stock covered by the registration statement.
Subject to the Buyer's performance of its obligations under clause (iv)
below, each Seller Stockholder shall comply with all prospectus delivery
requirements under the Securities Act.
(iv) The Buyer shall notify each Seller Stockholder, at any time
when a prospectus relating to the registration statement is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading, and, at the request of the
Seller or the Seller Stockholder, but subject to the provisions of Clause
(ii) above, the Buyer will promptly prepare, complete, and file as
necessary (and, when completed, give notice to each Seller Stockholder) a
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such shares of Buyer Stock, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading.
(v) The Buyer shall cause all of the shares of Buyer Stock issued
to the Seller hereunder to be listed on each securities exchange on which
securities of the same class issued by the Buyer are then listed.
(vi) The Buyer shall provide a transfer agent and registrar for
all of the shares of Buyer Stock issued to the Seller hereunder not later
than the effective date of the registration statement.
(vii) In the event of the issuance of any stop order suspending
the effectiveness of the registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any shares of Buyer Stock included in the registration
statement for sale in any jurisdiction, the Buyer shall use commercially
reasonable efforts promptly to obtain the withdrawal of such order.
<PAGE> -36-
All expenses incurred by Buyer in complying with this subsection (a),
including, without limitation, all registration and filing fees, printing
expenses, and fees and disbursements of counsel for the Buyer, are herein
called "Registration Expenses". All Seller commissions applicable to the
sales of the Buyer Stock and all fees and disbursements of counsel for any
Seller Stockholder are herein called "Seller Expenses".
(b) Allocation of Expenses. The Buyer will pay all Registration
Expenses in connection with registration pursuant to this Section 6.08.
All Seller Expenses in connection with such registration shall be borne by
the Seller Stockholder.
(c) Indemnification. In connection with the registration of shares of
the Buyer Stock under the Securities Act pursuant to this Section 6.08, the
Buyer will indemnify and hold harmless the seller of such shares of Buyer
Stock, each underwriter of such shares of Buyer Stock and each other
person, if any, who controls such seller or underwriter within the meaning
of Section 15 of the Securities Act, against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and
disbursements), joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon (i) any
untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement under which such shares of Buyer Stock were
registered under the Securities Act pursuant to this Section 6.08, or any
post-effective amendment thereof, or the omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) any untrue statement (or
alleged untrue statement) of a material fact contained in any final
prospectus (as amended or supplemented, if the Buyer shall have filed with
the Commission any amendment thereof or supplement thereto), or the
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading; and will reimburse such seller, underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such seller, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
expense, provided, however, that the Buyer will not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any untrue statement (or alleged untrue
statement) or omission (or alleged omission) of a material fact made in
said registration statement, said preliminary prospectus or said prospectus
or said amendment or supplement, in reliance upon and in conformity with
written information furnished to the Buyer through an instrument duly
executed by such seller or underwriter specifically for use in the
preparation thereof. In connection with the registration of shares of the
Buyer Stock under the Securities Act pursuant to this Section 6.08, each
seller of such shares of Buyer Stock, severally and not jointly, will
indemnify and hold harmless the Buyer, each person, if any, who controls
the Buyer within the meaning of Section 15 of the Securities Act, each
officer of the Buyer who signs the registration statement, each director of
the
<PAGE> -37-
Buyer, each underwriter and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages, liabilities or expenses (including reasonable attorneys'
fees and disbursements), joint or several, to which the Buyer or such
officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, and will reimburse the Buyer or such
officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by the Buyer or such officer, director,
underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or expense, but only
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon any untrue
statement (or alleged untrue statement) or omission (or alleged omission)
of a material fact referred to in clause (i) or (ii) of this subsection
(c), and provided, however, that this paragraph shall apply if and only if
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in reliance upon and in conformity with information
furnished in writing to the Buyer by or on behalf of such seller
specifically for use in such registration statement or prospectus. It
shall be a condition of the Buyer's obligations to effect registration of
the shares of Buyer Stock hereunder that the sellers participating in such
registration provide the Buyer and the underwriters, if any, with all
material facts, including, without limitation, furnishing such
certificates, questionnaires and legal opinions as may be required by the
Buyer or such underwriters, concerning such participating sellers which are
reasonably required to be stated in the registration statement or in the
prospectus or are otherwise required in connection with the offering. If
any third party shall notify any Party with respect to any matter that may
give rise to a claim for indemnification against any other Party under this
Section 6.08(c), the Parties' respective defense, settlement,
participation, and other procedural rights with respect to that matter
shall be determined by applying, mutatis mutandis, the procedures set forth
in the Indemnification Agreement. The indemnification provided for in this
Section 6.08 shall remain in full force and effect following the Closing
regardless of any investigation made by or on behalf of the indemnified
party or any officer, director, or controlling person of the indemnified
party, and shall survive the transfer of the Buyer Stock covered by the
applicable registration statement.
6.09 Hart-Scott-Rodino Filing Fees. The Seller agrees to reimburse the
Buyer, upon demand, for one-half of any filing fees paid by the Buyer in
connection with any filings required under the Hart-Scott-Rodino Act,
without regard to whether or not a Closing occurs hereunder.
6.10 Severance. For a period of twelve (12) months following the
Closing, the Buyer shall cause McBee to pay severance to those employees of
McBee identified on Exhibit E attached hereto whose employment is
terminated by McBee after the Closing Date, on the terms and in the amounts
described in such Exhibit E.
<PAGE> -38-
ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
7.01 Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section 3.01
and Article IV above (taken collectively and individually) shall be true
and correct in all material respects (and each of the representations and
warranties contained in Sections 3.01(g), 4.10 and 4.28 shall be true in
all respects) at and as of the Closing Date, as though made again at and as
of such date, without giving any effect to any amendment of the Disclosure
Schedule delivered to the buyer after the date of this Agreement;
(b) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) McBee shall have procured all of the third party consents
specified in Section 5.02 above, McBee shall have used commercially
reasonable efforts to cause Litton Business Systems, Inc. to assign to
McBee the Intellectual Property identified with an asterisk in Section
4.13(d) of the Disclosure Schedule, McBee shall have been released from any
Liability with respect to the loan arrangements with the Colorado National
Bank (and all Security Interests in connection therewith shall be
discharged) and the guaranties of any obligations of the Seller or any
Affiliate of the Seller, and all employees of McBee shall have been
released from any obligations to the Seller of any Affiliate of the Seller
(other than McBee) in respect of noncompetition covenants;
(d) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of the Buyer to own Purchased Shares and to control McBee, or
(iv) have a Material Adverse Effect on the right of McBee to own its assets
and to operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(e) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section 7.01(a)
through (d) is satisfied in all respects;
<PAGE> -39-
(f) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated, and the Parties and McBee shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.01(b), 3.02(b), 3.02(c) and 4.03 above;
(g) an estoppel certificate or landlord's acknowledgment from the
lessor under the respective leases for the properties leased by McBee in
Damascus, Virginia and Parsippany, New Jersey, confirming the matters set
forth in Section 4.12(b);
(h) the Seller's Secretary shall have executed and delivered to the
Buyer a certificate in form and substance as set forth in Exhibit F
attached hereto regarding the Seller's charter, by-laws, authorizing
resolutions, and incumbency of officers;
(i) the Seller shall deliver to the Buyer a good standing
certificate in respect of itself and McBee issued by the Secretary of State
of Colorado, and a certificate of good standing issued by the Secretary of
State of each state in which McBee is qualified to do business as a foreign
corporation;
(j) the relevant parties shall have entered into side agreements
in form and substance as set forth in Exhibits G-1 and G-2 attached hereto,
and the same shall be in full force and effect;
(k) the Buyer shall have received from counsel to the Seller and
the Seller Stockholders an opinion in form and substance as set forth in
Exhibit H attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
(l) the Buyer shall have received the resignations, effective as
of the Closing Date, of each director and officer of McBee other than those
whom the Buyer shall have specified in writing at least five business days
prior to the Closing;
(m) the Buyer shall have obtained, on terms and conditions
satisfactory to it in its sole discretion, all of the financing it needs in
order to consummate the transactions contemplated hereby and to fund the
working capital requirements of McBee after the Closing Date;
(n) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire substantially
all the assets of McBee Canada;
<PAGE> -40-
(o) the Buyer's Board of Directors shall have received a fairness
opinion from Tucker Anthony regarding the transactions contemplated herein
and in the Asset Agreement, in form and substance satisfactory to such
Board of Directors in its sole discretion;
(p) the Buyer shall have satisfied itself, in its sole discretion,
that both the remedial actions planned to be taken by McBee to become Year
2000 Compliant, and the person and dollar budget described in connection
therewith, as set forth in Section 4.13(f) of the Disclosure Schedule, are
adequate; and
(q) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Buyer.
The Buyer may waive any condition specified in this Section 7.01 if it
executes a writing so stating at or prior to the Closing.
7.02 Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 3.02
above shall be true and correct in all material respects at and as of the
Closing Date, as though made again at and as of such date;
(b) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(d) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section 7.02(a)
through (c) is satisfied in all respects;
(e) All applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated, and the Parties and
<PAGE> -41-
McBee shall have received all other authorizations, consents, and approvals
of governments and governmental agencies referred to in Section 3.01(b),
3.02(b), 3.02(c) and 4.03 above;
(f) the relevant parties shall have entered into side agreements
in form and substance as set forth in Exhibits G-1 and G-2 attached hereto,
and the same shall be in full force and effect;
(g) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit I attached hereto,
addressed to the Seller, and dated as of the Closing Date;
(h) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire substantially
all the assets of McBee Canada; and
(i) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Seller.
The Seller may waive any condition specified in this Section 7.02 if it
executes a writing so stating at or prior to the Closing, and any such
waiver shall be binding upon the Stockholder's Representative.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.01 Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in Sections 4.01
through 4.10 and 4.12 through 4.28 of this Agreement, and of the Buyer
contained in Sections 3.02(f) and 3.02(i) of this Agreement, shall survive
the Closing hereunder (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two years thereafter.
All of the other representations and warranties of the Parties contained in
this Agreement shall survive the Closing (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect, subject to any
applicable statutes of limitations.
8.02 Indemnification Provisions for Benefit of the Buyer Prior to
the Closing. In the event that the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has
breached) any of its representations, warranties, and covenants contained
herein, provided that the Buyer makes a written claim for indemnification
against the Seller
<PAGE> -42-
pursuant to Section 11.07 below, then the Seller agrees to protect, defend,
hold harmless and indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach), including all Adverse Consequences arising out of the enforcement
of this Section 8.02; provided, however, that the Seller shall not have any
obligation to compensate the Buyer in respect of any Adverse Consequences
resulting from any breaches or alleged breaches of the representations and
warranties contained in Section 3.01 and Article IV of this Agreement
(other than breaches or alleged breaches of the representations and
warranties contained in Section 4.11 above with respect to the federal and
state income taxes of McBee, for which the Buyer will be fully
compensated), until the Buyer has suffered aggregate Adverse Consequences,
by reason of all such breaches under this Agreement and all applicable
breaches under the Asset Purchase Agreement, in excess of $1,200,000, at
which point the Seller will be obligated to indemnify the Buyer from and
against all Adverse Consequences in excess of that amount.
8.03 Indemnification Provisions for Benefit of the Seller. In the
event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, and, if there
is an applicable survival period pursuant to Section 8.01 above, provided
that the Seller makes a written claim for indemnification against the Buyer
pursuant to Section 11.07 below within such survival period, then the Buyer
agrees to protect, defend, hold harmless and indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach), including all Adverse
Consequences arising out of the enforcement of this Section 8.04; provided,
however, that the Buyer shall not have any obligations to compensate the
Seller in respect of any Adverse Consequences resulting from any breaches
or alleged breaches of the representations and warranties contained in
Section 3.02 of this Agreement until the Seller has suffered aggregate
Adverse Consequences, by reason of all such breaches under this Agreement
and all applicable breaches under the Asset Purchase Agreement, in excess
of $1,200,000, at which point the Buyer will be obligated to indemnify the
Seller from and against all Adverse Consequences in excess of that amount.
In addition, the Buyer shall indemnify the Seller for any failure by McBee
to comply with WARN or any analogous state law as a result of any actions
taken by the Buyer or McBee following the Closing.
8.04 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VIII, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
<PAGE> -43-
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 30
calendar days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim (it being understood
by the Parties that the Indemnified Parties may take such actions as are
reasonable in connection with its defense until it receives such notice
from the Indemnifying Party), (ii) the Third Party Claim involves only
monetary damages and does not seek an injunction or other equitable relief,
and (iii) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party; provided, however,
that if the Indemnified Party is covered, in whole or in part, by an
insurance policy with respect to any Third Party Claim, then the
Indemnifying Party's defense against such Third Party Claim shall be
limited or precluded as required by the terms of the applicable insurance
policy.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.04(b) above, and subject
to the provisions of any applicable insurance policies of the Indemnified
Party, (i) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 8.04(b) above is
or becomes unsatisfied, or if otherwise required under the terms of any
applicable insurance policy of the Indemnified Party, however, (i) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys'
fees and expenses), and (iii) the Indemnifying Parties will remain
responsible for any Adverse Consequences the
<PAGE> -44-
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Article VIII.
8.05 Indemnification for the Benefit of the Buyer After Closing. In
addition to the rights of the Buyer set forth herein, if the Seller (i)
refuses to assume a third-party claim within the time periods set forth in
this Article VIII, (ii) fails to provide reasonable evidence (such as a
payment or performance bond), within 30 calendar days after receiving a
written claim, that it is financially or otherwise able to pay in full the
amount set forth in such claim, (iii) fails to pay amounts due under this
Article VIII as agreed by the Parties or as determined by a court of
competent jurisdiction or (iv) has ceased to exist as a corporate entity,
the Buyer has rights of indemnification for breaches after the Closing by
the Seller of any of its representations, warranties or covenants herein as
set forth in the Seller Stockholders Agreement.
8.06 Determination of Adverse Consequences. All indemnification
payments under this Article VIII shall be deemed adjustments to the
Purchase Price, and the Parties agree that they will not take any positions
or other actions (including reporting adjustments on their applicable Tax
Returns) inconsistent with this treatment. No Purchase Price adjustment
pursuant to Section 2.05, however, will be subject to the provisions of
Article VIII to the extent of the amount of such adjustment.
8.07 Exclusive Remedy. Except as set forth in this Section 8.07,
in the Seller Stockholders Agreement or in the Lease Agreement, the
indemnification provided in this Article VIII shall be the sole and
exclusive remedy for any inaccuracy or breach of any representation,
warranty or covenant made by any Party in this Agreement. Nothing herein
shall limit any Party's remedy for fraud or intentional breach of covenant.
The foregoing indemnification provisions are in addition to, and not in
derogation of, any equitable remedy any Party may have for breach of any
covenant, and any rights any Party may have under the Seller Stockholders
Agreement or the Lease Agreement. The Seller hereby agrees that it will
not make any claim for indemnification against McBee by reason of the fact
that it or any of its employees or agents was a director, officer,
employee, or agent of any such entity or was serving at the request of any
such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses, or otherwise
and whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller
(whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
ARTICLE IX
TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between the Buyer and the Seller for certain tax matters following the
Closing Date:
<PAGE> -45-
9.01 Section 338(h)(10) Election. The Seller will join with the
Buyer in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local, or foreign tax law) with
respect to the purchase and sale of the Purchased Shares hereunder. Seller
will pay any Tax, including any liability of McBee for Tax resulting from
the application to it of Treasury Regulation Section 1.338(h)(10)-1(e)(5),
attributable to the making of such election and will indemnify the Buyer
and McBee against any Adverse Consequences arising out of any failure to
pay such Tax. Seller will also pay any state, local, or foreign Tax (and
indemnify the Buyer and McBee against any Adverse Consequences arising out
of any failure to pay such Tax) attributable to an election under state,
local or foreign law similar to the election available under Section 338(g)
of the Code (or which results from the making of an election under Section
338(g) of the Code) with respect to the purchase and sale of the Purchased
Shares hereunder.
9.02 Income Tax Periods Ending on or Before the Closing Date. The
Seller shall prepare or cause to be prepared and file all Tax Returns for
McBee in respect of Taxes based upon income for all periods ending on or
prior to the Closing Date. The Seller shall pay all Taxes based upon
income in respect of the periods covered by such Tax Returns, whether or
not shown as due on such Tax Returns, and McBee shall have no liability in
respect of such Taxes.
9.03 Non-Income Tax Periods Ending on or Before the Closing Date.
The Seller shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns (other than returns for Taxes based upon income) for
McBee for all periods ending on or prior to the Closing Date. The Seller
shall immediately reimburse McBee for any Taxes payable by McBee in respect
of such periods in excess of any related reserves for Taxes set forth in
the Closing Balance Sheet. The Buyer shall immediately reimburse the
Seller for the amount of any Taxes paid by Seller in respect of such
periods prior to the Closing for which the Buyer receives a corresponding
refund or credit for overpayment, to the extent such amount exceeds any
related Tax assets set forth in the Closing Balance Sheet.
9.04 Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of McBee for Tax periods which begin before the
Closing Date and end after the Closing Date. The Seller shall pay to the
Buyer within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to
the extent such Taxes are not accrued on the Closing Balance Sheet or were
not paid previously by Seller. The Buyer shall reimburse the Seller for
the amount of any excess Taxes paid by Seller in respect of the period
prior to the Closing Date upon receipt of a corresponding refund or credit
for overpayment, to the extent such amount exceeds any related Tax assets
set forth in the Closing Balance Sheet. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable
for a Taxable period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such Taxable period
ending on the Closing Date shall (x)
<PAGE> -46-
in the case of any Taxes other than Taxes based upon or related to income
or receipts, be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator
of which is the number of days in the entire Taxable period, and (y) in the
case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Taxable period ended
on the Closing Date (in such latter case, any net operating loss
carryovers, tax credit carryovers, and similar tax attribute carryovers
from a Tax period ending before the Closing Date to a Tax period which
begins before the Closing Date and ends after the Closing Date shall be
applied first to the period through the Closing Date).
9.05 Cooperation on Tax Matters.
(a) The Buyer, McBee and the Seller shall cooperate fully, as and
to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to this Section and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. McBee and the Seller agree
(i) to retain all books and records with respect to Tax matters pertinent
to McBee relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent
notified by the Buyer or the Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, McBee or
the Seller, as the case may be, shall allow the other party to take
possession of such books and records.
(b) The Buyer and the Seller further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
(c) The Buyer and the Seller further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
9.06 Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving McBee shall be terminated
as of the Closing Date and, after the Closing Date, McBee shall not be
bound thereby or have any liability thereunder.
<PAGE> -47-
9.07 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Seller when due, and the Seller will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, the Buyer will, and will cause
its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
9.08 Allocation of Purchase Price. The Buyer and the Seller shall
negotiate in good faith an allocation of the Purchase Price in accordance
with Treas. Reg. Section 1.338(b)-2T and 3T with reference to an appraisal
obtained by the Buyer from a nationally recognized appraisal firm, the cost
of the appraisal to be paid by the Buyer, which appraisal shall be binding
on the Parties.
ARTICLE X
TERMINATION
10.01 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time at least three Business Days prior to the
Closing if the Buyer is not satisfied with the results of its continuing
business, legal, and accounting due diligence regarding McBee;
(c) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (i) in the event the
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer has notified
the Seller of the breach, and the breach has continued without cure until
the earlier of the Closing or 30 days after the notice of breach, or (ii)
if the Closing shall not have occurred on or before June 26, 1998, by
reason of the failure or inability to satisfy any condition precedent under
Section 7.01; and
(d) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Seller has notified
the Buyer of the breach, and the breach has continued without cure until
the earlier of the Closing or 30 days after the notice of breach, or (ii)
if the Closing shall not have occurred on or before June 26, 1998, by
reason of the failure of any condition precedent under Section 7.02.
<PAGE> -48-
10.02 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 10.01 above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of any Party to
any other Party (except for any Liability of any Party then in breach),
except that the Buyer shall be entitled to its $250,000 deposit made in
connection with the Letter of Interest only if the Agreement is terminated
pursuant to Section 10.01(c)(i) hereof.
ARTICLE XI
MISCELLANEOUS
11.01 Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the Buyer and the Seller; provided, however, that any
Party may make any public disclosure it believes in good faith is required
by applicable law or any listing agreement concerning its publicly-traded
securities (in which case the disclosing Party will use commercially
reasonable efforts to advise the other Parties prior to making the
disclosure).
11.02 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
11.03 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof. The Letter of Interest is expressly
terminated hereby.
11.04 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Seller; provided,
however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
11.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
<PAGE> -49-
11.06 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.07 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: ROMO Corp.
7333 West Jefferson, Suite 210
Lakewood, Colorado 80235
Attn: H. Rex Martin, President
with a copy to: Lentz, Evans & King
Lincoln Center Building, Suite 2000
1660 Lincoln Street
Denver, Colorado 80264
Attn: Francis P. King, Esq.
If to the Buyer: New England Business Service, Inc.
500 Main Street
Groton, Massachusetts 01471
Attn: John F. Fairbanks, Vice President
with a copy to: Hill & Barlow
One International Place
Boston, Massachusetts 02110
Attn: Terrence W. Mahoney, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
11.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule (whether of The Commonwealth of
<PAGE> -50-
Massachusetts or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than The Commonwealth of
Massachusetts.
11.09 Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer, the Seller and the Stockholders' Representative. No
waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
11.11 Expenses. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
The Seller agrees that McBee has not borne nor will bear any of the
Seller's or the Stockholders' Representative's costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
11.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
11.13 Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
11.14 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly,
<PAGE> -51-
each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11.15 below), in
addition to any other remedy to which they may be entitled, at law or in
equity.
11.15 Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Suffolk County,
Massachusetts, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any defense
of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be
required of any other Party with respect thereto. Any Party may make
service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 11.07 above. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may
be enforced by suit on the judgment or in any other manner provided by law
or at equity.
* * * * *
[END OF PAGE - SIGNATURE PAGE IMMEDIATELY FOLLOWS]
<PAGE> -52-
IN WITNESS WHEREOF, the Parties hereto have executed this Stock
Purchase Agreement as an instrument under seal on the date first above
written.
NEW ENGLAND BUSINESS SERVICE, INC.
By:/s/ John F. Fairbanks
---------------------------
Title:Vice-President - Finance
ROMO CORP.
By:/s/ H. Rex Martin
---------------------------
H. Rex Martin, President
<PAGE> -53-
TABLE OF CONTENTS
Page No.
--------
ARTICLE I - DEFINITIONS 1
ARTICLE II - PURCHASE AND SALE OF PURCHASED SHARES 7
2.01 Basic Transaction 7
2.02 Initial Purchase Price 7
2.03 The Closing 7
2.04 Deliveries at the Closing 7
2.05 Adjustments to Initial Purchase Price 7
2.06 Intercompany Obligations 9
ARTICLE III - REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION 9
3.01 Representations and Warranties of the Seller 9
3.02 Representations and Warranties of the Buyer 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES CONCERNING McBEE 13
4.01 Organization, Qualification, and Corporate Power 13
4.02 Capitalization 13
4.03 Noncontravention 13
4.04 Brokers' Fees 14
4.05 Title to Assets 14
4.06 Subsidiaries 14
4.07 Financial Statements 14
4.08 Events Subsequent to Most Recent Fiscal Year End 15
4.09 Undisclosed Liabilities 17
4.10 Legal Compliance 17
4.11 Tax Matters 17
4.12 Real Property 19
4.13 Intellectual Property 21
4.14 Tangible Assets 23
4.15 Inventory 24
4.16 Contracts 24
4.17 Notes and Accounts Receivable 25
4.18 Powers of Attorney and Banking Matters 25
4.19 Insurance 25
4.20 Litigation 26
4.21 Product Warranty 26
<PAGE>
4.22 Product Liability 27
4.23 Employees 27
4.24 Employee Benefits 27
4.25 Guaranties 29
4.26 Environment, Health, and Safety 29
4.27 Certain Business Relationships with McBee 30
4.28 Disclosure 30
ARTICLE V - PRE-CLOSING COVENANTS 30
5.01 General 30
5.02 Notices and Consents 30
5.03 Operation of Business 31
5.04 Preservation of Business 31
5.05 Full Access 31
5.06 Notice of Developments 31
5.07 Exclusivity 31
5.08 Employee Benefit Plans 32
ARTICLE VI - POST-CLOSING COVENANTS 32
6.01 General 32
6.02 Litigation Support 33
6.03 Transition 33
6.04 Confidentiality 33
6.05 Covenant Not to Compete 33
6.06 Use of Names "McBee," McBee Systems" 34
6.07 Buyer Stock 34
6.08 Registration of the Buyer Common Stock 34
6.09 Hart-Scott-Rodino Filing Fees 38
6.10 Severance 38
ARTICLE VII - CONDITIONS TO OBLIGATION TO CLOSE 39
7.01 Conditions to Obligation of the Buyer 39
7.02 Conditions to Obligation of the Seller 41
ARTICLE VIII - REMEDIES FOR BREACHES OF THIS AGREEMENT 42
8.01 Survival of Representations and Warranties 42
8.02 Indemnification Provisions for Benefit of the Buyer Prior
to the Closing 42
8.03 Indemnification Provisions for Benefit of the Seller 43
8.04 Matters Involving Third Parties 43
<PAGE> -ii-
8.05 Indemnification for the Benefit of the Buyer After Closing 45
8.06 Determination of Adverse Consequences 45
8.07 Exclusive Remedy 45
ARTICLE IX - TAX MATTERS 45
9.01 Section 338(h)(10) Election 46
9.02 Tax Periods Ending on or Before the Closing Date 46
9.03 Tax Periods Beginning Before and Ending After the Closing Date 46
9.04 Cooperation on Tax Matters 47
9.05 Tax Sharing Agreements 47
9.06 Certain Taxes 48
9.07 Allocation of Purchase Price 48
ARTICLE X - TERMINATION 48
10.01 Termination of Agreement 48
10.02 Effect of Termination 49
ARTICLE XI - MISCELLANEOUS 49
11.01 Press Releases and Public Announcements 49
11.02 No Third Party Beneficiaries 49
11.03 Entire Agreement 49
11.04 Succession and Assignment 49
11.05 Counterparts 49
11.06 Headings 50
11.07 Notices 50
11.08 Governing Law 50
11.09 Amendments and Waivers 51
11.10 Severability 51
11.11 Expenses 51
11.12 Construction 51
11.13 Incorporation of Exhibits, Annexes, and Schedules 51
11.14 Specific Performance 51
11.15 Submission to Jurisdiction 52
<PAGE> -iii-
EXHIBITS
Exhibit A Interim Balance Sheet (Section 2.05)
Exhibit B Seller Stockholders (Section 3.01)
Exhibit C Buyer Financial Statements (Section 3.02)
Exhibit D McBee Financial Statements (Section 4.07)
Exhibit E Severance Arrangements (Section 6.10)
Exhibit F Seller's Secretary's Certificate (Section 7.01)
Exhibit G-1 Seller Stockholders Agreement(Article I)
Exhibit G-2 Lease Agreement for Athens, Ohio (Section 7.01)
Exhibit H Opinion of Seller and Seller Stockholders' Counsel
(Section 7.01)
Exhibit I Opinion of Buyer's Counsel (Section 7.02)
Exhibit J Employee Benefit Plans
<PAGE> - iv -
Exhibit 2.2
NEW ENGLAND BUSINESS SERVICE, INC.
500 Main Street
Groton, Massachusetts 01471
Agreement to Furnish Copies of Omitted Exhibits and Schedules to
Stock Purchase Agreement with ROMO Corp.
New England Business Service, Inc. (the "Registrant") is not
filing as exhibits to its Current Report on Form 8-K dated June
18, 1998, copies of the exhibits and schedules to the Stock
Purchase Agreement among the Registrant and ROMO Corp. dated May
1, 1998, which Agreement is filed as Exhibit 2.1 thereto.
Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, copies of such omitted exhibits and
schedules.
Dated: June 18, 1998
NEW ENGLAND BUSINESS SERVICE, INC.
(Registrant)
By: /s/ John F. Fairbanks
-----------------------
John F. Fairbanks
VP, Chief Financial Officer
(Principal Financial and Accounting Officer)
======================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
NEW ENGLAND BUSINESS SERVICE, INC.,
NEBS BUSINESS FORMS LTD.,
McBEE SYSTEMS OF CANADA, INC.,
AND
ROMO CORP.
MAY 1, 1998
=====================================================================
ASSET PURCHASE AGREEMENT
This Agreement is entered into on May 1, 1998, by and among New England
Business Service, Inc., a Delaware corporation ("NEBS"), NEBS Business Forms
Ltd., an Ontario corporation (the "Buyer"), McBee Systems of Canada, Inc.,
an Ontario corporation (the "Seller"), and ROMO Corp., a Colorado
corporation (the "Stockholder"). NEBS, the Buyer, the Seller and the
Stockholder are referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, the Seller produces and sells checks, accounting forms, and other
printed materials; and
WHEREAS, the Seller desires to sell, transfer and assign to the Buyer, and
the Buyer desires to purchase and acquire from the Seller, substantially all
the assets of the Seller, in return for cash and the assumption of certain
specified liabilities; and
WHEREAS, the Stockholder is the sole stockholder of the Seller and will
benefit directly from the sale of assets contemplated hereby.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties hereto, intending to
become legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following words and phrases, when
used herein, shall have the meanings specified or referred to below:
"Access Period" means the longer of (a) a period of five years following the
Closing Date, or (b) the period of time beginning on the Closing Date and
ending on the date when taxes may no longer be assessed or reassessed under
the applicable statutes of limitation, excluding any period of waiver or
extensions thereof.
"Acquired Assets" means all right, title, and interest in and to all of the
properties, assets, rights, privileges and business of the Seller, tangible
and intangible, including all of its (a) leaseholds and subleaseholds
therein, improvements, fixtures, and fittings thereon, and easements,
rights-of-way, and other appurtenants thereto (such as appurtenant rights in
and to public streets), (b) tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies),
(c) Intellectual Property, all goodwill associated therewith, licenses and
sublicenses granted and obtained with respect
<PAGE
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all
jurisdictions, (d) leases, subleases, and rights thereunder, (e) agreements,
contracts, instruments, other similar arrangements, and rights thereunder,
(f) accounts, notes, and other receivables, (g) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (excluding any such
item relating to the payment of Taxes), (h) franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, (i) assets relating to
its Benefit Plans, (j) books, records, ledgers, files, documents,
correspondence, lists (including customer lists), plats, architectural
plans, drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or written
materials, and (k) Cash; provided, however, that the Acquired Assets shall
not include (i) the corporate charter, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, seals,
corporate minute books, stock transfer books, blank stock certificates, and
other documents relating to the organization, maintenance, and existence of
the Seller as a corporation, (ii) receivables from Affiliates of the
Stockholder (other than McBee Systems, Inc.), and capital tax and income tax
obligations, or (iii) any of the rights of the Seller or the Stockholder
under this Agreement (or under any other agreement between the Seller or the
Stockholder on the one hand and the Buyer or NEBS on the other hand entered
into on or after the date of this Agreement).
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses, determined after taking into consideration all proceeds of
insurance collected by or paid to the Indemnified Party.
"Affiliate" means, with respect to a specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified.
"Agreement" means this agreement between the Parties, as the same may be
amended from time to time in accordance with the provisions of Section 10.09
below.
"Assumed Liabilities" means (a) all Liabilities of the Seller set forth on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto), (b) all Liabilities of the Seller which have arisen after the Most
Recent Fiscal Year End in the Ordinary Course of Business and which are
reflected on the Closing Balance Sheet (other than any Liability resulting
from, arising out of, relating to, in the nature of, or caused by any breach
of contract, breach of warranty, tort, infringement, or violation of law),
(c) all obligations of the Seller under the agreements, contracts, leases,
licenses, and other arrangements referred to in the definition of Acquired
Assets, and (d) the Liabilities and obligations of the Seller under its
Benefit Plans as specified in Exhibit I to this Agreement; provided,
however, that the Assumed Liabilities shall not include (i) any Liability of
the Seller for Taxes; (ii) any obligation of the Seller to indemnify any
Person
<PAGE> -2-
by reason of the fact that such Person was a director, officer, employee, or
agent of the Seller or was serving at the request of the Seller as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such indemnification is pursuant to any statute, charter document,
bylaw, agreement, or otherwise); (iii) any Liability of the Seller for costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby; (iv) any Liability or obligation of the Seller in
respect of any options, warrants or similar rights to acquire any shares of
its capital stock; (v) any benefit plan Liabilities excluded under Section
5.08 hereof, as set forth in Exhibit I; (vi) payables to Affiliates of the
Stockholder (other than McBee Systems, Inc.), (vii) any action, suit,
arbitration, proceeding, hearing, or investigation to which the Seller is a
party, including, without limitation, the matters listed in Section 3.22 of
the Disclosure Schedule, and (viii) any Liability or obligation of the
Seller or the Stockholder under this Agreement (or under any other agreement
between the Seller or the Stockholder on the one hand and the Buyer or NEBS
on the other hand entered into on or after the date of this Agreement).
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that reasonably forms the basis for any
specified consequence.
"Benefit Laws" means all laws, regulations, orders or other legislative,
administrative or judicial promulgations applicable to Benefit Plans.
"Benefit Plan" means any employee benefit, health, welfare, supplemental
unemployment benefit, bonus, severance, pension, profit sharing, deferred
compensation, stock compensation, stock purchase, retirement,
hospitalization insurance, medical, dental, legal, disability and similar
plans or arrangements or practices relating to the employees or former
employees of the Seller (in each case, oral or written), whether registered
or unregistered, funded or unfunded, all as listed and described in Section
3.26 of the Disclosure Schedule.
"Business Day" means any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2.04 below.
"Closing Balance Sheet" has the meaning set forth in Section 2.05 below.
"Closing Date" has the meaning set forth in Section 2.04 below.
<PAGE> -3-
"Collective Agreement" means any Collective Agreement binding the Seller and
all related documents including letters of understanding, letters of intent
and other written communications with bargaining agents for employees of the
Seller, which impose any obligations upon the Seller, all as listed and
described in Section 3.25 of the Disclosure Schedule.
"Confidential Information" means any information concerning the business and
affairs of the Seller that is not already generally available to the public.
"Disclosure Schedule" has the meaning set forth in the preamble to
Article III below.
"Dollars" or "$" shall mean United States dollars.
"Environmental, Health, and Safety Laws" means all laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
municipal by-laws, ordinances, decisions, awards and charges thereunder) of
federal, provincial, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety.
"Excise Tax Act" means the Excise Tax Act (Canada), as amended, and the
regulations promulgated thereunder.
"Final Auditor" has the meaning set forth in Section 2.05 below.
"Final Determination" has the meaning set forth in Section 2.05 below.
"Final Purchase Price" shall mean the amount of the Final Determination,
plus the amount of the Assumed Liabilities.
"Financial Statements" has the meaning set forth in Section 3.07 below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8.04 below.
"Indemnifying Party" has the meaning set forth in Section 8.04 below.
"Initial Cash Payment" has the meaning set forth in Section 2.03 below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all
<PAGE> -4-
copyrights, and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications, registrations, and
renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheet" has the meaning set forth in Section 2.05 of the
Stock Purchase Agreement.
"ITA" means the Income Tax Act (Canada), as amended, and the regulations
promulgated thereunder.
"Knowledge" means actual knowledge without any implied duty to investigate.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due),
including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on the business or
financial condition of the Seller.
"Most Recent Balance Sheet" means the balance sheet contained within the
Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section 3.08
below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 3.08
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.08
below.
"NEBS" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, partnership, limited liability partnership,
corporation, limited liability company, association, joint stock company,
trust, estate, joint venture, unincorporated organization, or governmental
entity (or any department, agency, or political subdivision thereof).
<PAGE> -5-
"Related Agreement" means any agreement, certificate or instrument executed
and delivered by a Party at the Closing or otherwise in connection with the
consummation of the transaction contemplated by this Agreement.
"Security Interest" means any mortgage, pledge, lien, lis pendens, charge,
attachment, easement, restriction or other encumbrance of any nature, except
(a) mechanic's, repairer and storer's, and similar liens, (b) liens for
Taxes not yet due and payable or for Taxes that the taxpayer is contesting
in good faith through appropriate proceedings, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, (d) other
liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money, and (e) any reservations or
exceptions contained within the original grants from the crown.
"Seller" has the meaning set forth in the preface above.
"Seller Stockholders Agreement" means the agreement attached hereto as
Exhibit F.
"Seller's Knowledge" means the Knowledge of any of the following
individuals: H. Rex Martin, Abraham M. Zeiderman, Mary Susan Jensen, John
Paukstis, Robert Kane, David Cohen or William Harding.
"Stock Purchase Agreement" means that certain agreement by and between NEBS
and the Stockholder, dated the date hereof, by which NEBS agrees to buy, and
the Stockholder agrees to sell, all the outstanding capital stock of McBee
Systems, Inc.
"Stockholder" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tax" or "Taxes" means all taxes and other imposts, levies, assessments,
audits, fees, premiums or charges imposed or required to be collected by any
federal, provincial, territorial, municipal, or foreign governmental
authority or subdivision thereof, including without limitation, income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital, franchise, profits, withholding, social security (or similar),
Canada Pension Plan, employment insurance, disability, employer health,
workers' compensation, real property, personal property, goods and services,
business and occupation, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
designation, election or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Third Party Claim" has the meaning set forth in Section 7.04 below.
<PAGE> -6-
"Year 2000 Compliant" means that the applicable Person's computer hardware,
software, and other computer or information systems (whether owned, leased,
licensed, or otherwise operated by such Person) will not terminate
operations, malfunction, or otherwise produce any invalid or incorrect data
or information as a result of the input of date data that includes the year
2000 or later years, or as a result of the passage of time from the year
1999 to the year 2000.
ARTICLE II
PURCHASE AND SALE
2.01 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, at the Closing NEBS agrees to cause the Buyer
to purchase from the Seller, and the Seller agrees to sell, transfer,
convey, and deliver to the Buyer, all of the Acquired Assets, free and clear
of all Security Interests, for the consideration specified below in this
Article II.
2.02 Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, at the Closing NEBS agrees to cause the Buyer
to assume and become responsible for all of the Assumed Liabilities. The
Buyer will not assume or have any responsibility, however, with respect to
any other obligation or Liability of the Seller not included within the
definition of Assumed Liabilities.
2.03 Initial Cash Payment. In addition to assuming the Assumed
Liabilities, the Buyer agrees to pay to the Seller at the Closing $5,000,000
(the "Initial Cash Payment") payable by wire transfer or delivery of other
immediately available funds, and the Seller hereby directs the Buyer to make
such payment directly to the Stockholder.
2.04 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hill & Barlow
in Boston, Massachusetts, commencing at 9:00 a.m. local time on May 22,
1998, or, if later, but subject to the provisions of Section 10.01 below,
the third Business Day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself), or such other date as
the Buyer and the Seller may mutually determine (the "Closing Date").
2.05 Adjustments to Initial Cash Payment. The Initial Cash Payment
shall be subject to adjustment after the Closing Date as provided in Section
2.05 of the Stock Purchase Agreement.
2.06 Allocation. NEBS and the Stockholder shall negotiate in good faith
an allocation of the Final Purchase Price, as determined pursuant to Section
2.05, with reference to an appraisal obtained by NEBS from a nationally
recognized appraisal firm, the cost of such appraisal to be paid by NEBS,
which appraisal shall be binding on the Parties.
2.07 Section 22 Election. The Seller and the Buyer agree to execute and
file a joint election in prescribed form with respect to the sale of
accounts receivable under Section 22 of the
<PAGE> -7-
ITA and the corresponding provisions of any other applicable taxing statute
or regulation. The Seller and the Buyer agree to prepare and file their
respective tax returns in a manner consistent with such elections and the
allocation of the Final Purchase Price set out in this Agreement and to
include the election in prescribed form with their respective tax returns.
The Seller agrees to indemnify and save harmless the Buyer, and the Buyer
agrees to indemnify and save harmless the Seller, in respect of any
liability, loss, cost, expense, additional tax, interest, penalty or legal
or accounting fees paid or incurred by the indemnified party as a result of
the failure of the Seller or the Buyer, as the case may be, to perform its
obligations pursuant to this Section 2.07.
2.08 Transfer Taxes. The Buyer shall be liable for and shall pay all
land transfer taxes, federal and provincial sales taxes and all other taxes,
duties, registration charges or other like charges properly payable by a
buyer upon and in connection with the conveyance and transfer of the
Acquired Assets by the Seller to the Buyer. The Parties will use their best
efforts in good faith to minimize (or eliminate) any taxes payable under the
Excise Tax Act (or similar provincial legislation) in respect of the Closing
by, among other things, making such elections and taking such steps as may
be provided for under that Act (including, for greater certainty, making a
joint election in a timely manner under Section 167 of that Act, including
the corresponding provisions of any relevant provincial legislation) as may
reasonably be requested by the Buyer in connection with the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER
The Seller and the Stockholder jointly and severally represent and warrant
to the Buyer that the statements contained in this Article III are correct
and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Article III), except as set forth in the disclosure schedule delivered by
the Seller to the Buyer on the date hereof (the "Disclosure Schedule"). The
Disclosure Schedule shall be arranged in sections corresponding to the
lettered and numbered sections in this Agreement which require the
disclosure. Any matter disclosed in one section of the Disclosure Schedule
may be cross-referenced in other sections of the Disclosure Schedule, and
upon such cross-referencing shall be deemed disclosed for all purposes of
the section of the Disclosure Schedule in which such cross-reference is
contained to the extent (i) this Agreement requires such disclosure and (ii)
the relevance and significance of such disclosure is evident from such
disclosure or cross-reference.
3.01 Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
Province of Ontario. Section 3.1 of the Disclosure Schedule identifies each
jurisdiction in which the Seller is duly qualified to do business as a
foreign or extra-provincial corporation, and the Seller is not required to
be licensed or qualified to conduct its business or own its property in any
other jurisdiction. The Seller is in good standing in each jurisdiction in
which it is qualified to do business.
<PAGE> -8-
3.02 Authorization of Transaction. Each of the Seller and the
Stockholder has full right, power, authority and capacity to execute and
deliver this Agreement and the Related Agreements to which it is or may
become party, and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Related
Agreements has been duly authorized by the Stockholder. This Agreement and
the Related Agreements to which each of the Seller and the Stockholder is or
may become a party constitute (or will constitute when executed or
delivered) the valid and legally binding obligations of the Seller and
Stockholder, enforceable in accordance with their respective terms and
conditions.
3.03 Noncontravention. Neither the execution and the delivery of this
Agreement and the Related Agreements, nor the consummation of the
transactions contemplated hereby and thereby (including the assignments and
assumptions referred to in Article II above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which either the Seller or the Stockholder is subject or
any provision of the constituting documents or bylaws of the Seller, or
(ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Seller
is a party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any Security Interest upon any of its
assets). Neither the Seller nor the Stockholder needs to give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
3.04 Residence. The Seller is not a non-resident of Canada within the
meaning of the ITA.
3.05 Brokers' Fees. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.06 Title to Assets. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the Most Recent Balance Sheet (including such
items as have been fully expensed) or acquired after the date thereof, free
and clear of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet.
3.07 Subsidiaries. The Seller has no Subsidiaries and does not own,
directly or indirectly, any of the capital stock or beneficial interest of
any Person.
3.08 Financial Statements. Attached hereto as Exhibit B are the
following financial statements of the Seller (collectively the "Financial
Statements"): (i) the unaudited separate and combined balance sheets and
statements of income, shareholders' investment and cash flows (the "Most
Recent Financial Statements") as of and for the three months ended March 28,
1998 (the "Most Recent Fiscal Month End") for the Seller; (ii) audited
combined balance sheets, statements of income, shareholders' investment and
cash flows as of and for the fiscal years
<PAGE> -9-
ended December 28, 1996 and December 27, 1997 (the "Most Recent Fiscal Year
End") for the Seller; and (iii) the unaudited Interim Balance Sheet. The
Financial Statements (including the notes thereto) present fairly the
financial position of the Seller as of such dates and the results of
operations of the Seller for such periods in conformity with GAAP; provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not, as they relate to periods prior to
March 28, 1998, be material individually or in the aggregate) and lack
footnotes and other presentation items.
3.09 Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of the Seller. Without limiting the generality of the
foregoing, since that date:
(a) the Seller has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than (i) in the Ordinary Course of
Business, (ii) where any such transaction was with an Affiliate of the
Seller, for a fair consideration, and (iii) transactions which are, singly
and in the aggregate, immaterial;
(b) the Seller has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) involving more than $50,000 or outside the Ordinary Course of
Business or, in the case of any such transaction with an Affiliate, other
than for a fair consideration;
(c) no Person (including the Seller) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) involving more than
$50,000 to which the Seller is a party or by which it is bound;
(d) the Seller has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(e) the Seller has not made any capital expenditure (or series of
related capital expenditures) either involving more than $50,000 or outside
the Ordinary Course of Business;
(f) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $25,000 or outside the Ordinary Course of Business;
(g) the Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$25,000 singly or $50,000 in the aggregate (other than indebtedness for
money borrowed from the Stockholder, consistent with past practice);
<PAGE> -10-
(h) the Seller has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(i) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) either involving
more than $25,000 or outside the Ordinary Course of Business;
(j) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(k) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(l) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business, and has not engaged in any transaction which
gives rise to an intercompany obligation between the Seller and the
Stockholder, other than indebtedness to the Stockholder;
(m) the Seller has not entered into or made any commitment to
enter into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(n) the Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(o) the Seller has not adopted, amended, modified, improved, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers,
and employees (or taken any such action with respect to any other Benefit
Plan);
(p) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(q) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(r) to Seller's Knowledge, except as expressly contemplated by this
Agreement or the Disclosure Schedule, there has not been any other
occurrence, event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving the Seller; and
(s) the Seller has not committed to any of the foregoing.
3.10 Undisclosed Liabilities. The Seller has no Liability which
must be shown on the face of a balance sheet prepared in accordance with
GAAP (and to the Seller's Knowledge there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge,
<PAGE> -11-
complaint, claim, or demand against it giving rise to such Liability),
except for (i) Liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto), and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law).
3.11 Legal Compliance. Each of the Seller and its Affiliates for
whose actions the Seller may be responsible has complied in all material
respects with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, provincial, local, and foreign governments (and all
agencies thereof), including specifically all laws governing the escheat of
unclaimed property, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply. Notwithstanding the
information set forth in Section 3.11 of the Disclosure Schedule, the
escheat obligations of the Seller and its Affiliates for whose actions the
Seller may be responsible do not exceed the recorded liabilities therefor.
3.12 Tax Matters.
(a) The Seller has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by the Seller (whether or not shown on any Tax
Return) have been paid. The Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where the Seller does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of the Seller that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) The Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(c) There is no dispute or claim concerning any Liability for Taxes
of the Seller either (i) claimed or raised by any Tax authority in writing
or (ii) to Seller's Knowledge or the Knowledge of any employee of the Seller
or the Stockholder with functional responsibility for Tax matters, based
upon personal contact with any agent of such authority. Section 3.11 of the
Disclosure Schedule lists all federal, provincial, territorial, state,
local, and foreign income Tax Returns filed with respect to the Seller for
taxable periods ended on or after December 31, 1993, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Seller has delivered to the Buyer
correct and complete copies of all federal income Tax Returns as filed,
examination reports, assessments, reassessments, "30 day" letters and
statements of deficiencies assessed against or agreed to by the Seller (with
respect to the Seller) since December 31, 1993.
<PAGE> -12-
(d) The Seller has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to the assessment,
reassessment or deficiency of any Tax.
(e) The unpaid Taxes of the Seller (i) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Liability for Taxes (rather
than any reserve for Liability for the deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Seller in filing
its Tax Returns.
3.13 Real Property.
(a) Section 3.13(a) of the Disclosure Schedule lists and describes
briefly all real property that the Seller owns. With respect to each such
parcel of owned real property:
(i) the Seller has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for installments of special assessments not yet
delinquent and recorded easements, covenants, and other restrictions which
do not impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(ii) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting and adversely the current use,
occupancy, or value thereof;
(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not serve any
adjoining property for any purpose inconsistent with the use of the land,
and the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and maintained in all
material respects in accordance with applicable laws, rules, and
regulations;
<PAGE> -13-
(v) there are no material leases, subleases, licenses, or other
agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
(vi) there are no outstanding options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or interest
therein;
(vii) there are no parties (other than the Seller) in possession of
the parcel of real property;
(viii) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
(ix) each parcel of real property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property,
and access to the property is provided by paved public right-of-way with
adequate curb cuts available.
(b) Section 3.13(b) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Seller. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) required to be listed in Section 3.13(b) of
the Disclosure Schedule. With respect to each lease and sublease listed in
Section 3.13(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, and enforceable
against the Seller and, to the Seller's Knowledge, against any third parties
thereto, and is in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, and enforceable against the Seller and, to the Seller's Knowledge,
against any third parties thereto, and will continue to be in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby;
(iii) neither the Seller nor, to the Seller's or the Stockholder's
Knowledge, any other party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) neither the Seller nor, to the Seller's or the Stockholder's
Knowledge, any other party to the lease or sublease has repudiated any
provision thereof;
<PAGE> -14-
(v) there are no disputes, oral agreements, or forbearance programs
in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in all material respects in accordance with applicable laws,
rules, and regulations; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities, and each such facility abuts on and has direct vehicular access
to a public road, or has access to a public road via a permanent,
irrevocable appurtenant easement benefiting the owner of such facility, and
access to each such facility is provided by paved public right-of-way with
adequate curb cuts available.
3.14 Intellectual Property.
(a) The Seller has the sole and exclusive right to use the name
"McBee Systems."
(b) Except where failure to do so would not result, either
individually or in the aggregate, in a Material Adverse Effect, the Seller
owns or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by the Seller immediately
prior to the Closing hereunder will be owned or available for use by the
Seller on identical terms and conditions immediately subsequent to the
Closing hereunder. The Seller has taken all commercially reasonable action
to maintain and protect each item of Intellectual Property that it owns or
uses.
(c) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Stockholder and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Seller has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Seller must
license or refrain from using any Intellectual Property rights of any third
party) which has not been finally resolved. To the Knowledge of any of the
Stockholder and the directors and officers (and employees with
<PAGE> -15-
responsibility for Intellectual Property matters) of the Seller, no third
party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Seller.
(d) Section 3.14(d) of the Disclosure Schedule identifies each
patent, copyright and trademark registration which has been issued to the
Seller with respect to any of its Intellectual Property, identifies each
pending patent, copyright or trademark application or application for
registration which the Seller has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to
any of its Intellectual Property (together with any exceptions). The Seller
has delivered to the Buyer correct and complete copies of all such patents,
trademark or copyright registrations, applications, licenses, agreements,
and permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
3.14(d) of the Disclosure Schedule also identifies each trade name or
unregistered trademark used by the Seller in connection with its business.
With respect to each item of Intellectual Property required to be identified
in Section 3.14(d) of the Disclosure Schedule:
(i) the Seller possesses all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(iv) the Seller has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
(e) Section 3.14(e) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission, including
specifically any items of such Intellectual Property owned by any Affiliate
of the Seller. The Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in Section 3.14(e) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
<PAGE> -16-
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
(iii) neither the Seller nor, to the Seller's or the Stockholder's
Knowledge, any other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) neither the Seller nor, to the Seller's or the Stockholder's
Knowledge, any other party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges the
legality, validity, or enforceability of the underlying item of Intellectual
Property; and
(viii) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(f) Section 3.14(f) of the Disclosure Schedule sets forth in detail
(i) McBee's current status with respect to becoming Year 2000 Compliant
(including, without limitation, a list of compliant and non-compliant
software currently used by McBee), (ii) the remedial actions being taken and
planned to be taken by McBee to become Year 2000 Compliant, and (iii) the
estimated person-hours and costs, and the personnel and resources, expected
to be associated with taking the actions described in clause (ii). To the
Seller's Knowledge and reasonable belief, and to the Knowledge and
reasonable belief of any employee of the Seller or the Stockholder with
functional responsibility for Year 2000 compliance matters, the remedial
actions described pursuant to clause (ii) above are sufficient to cause
McBee to become Year 2000 Compliant to the extent necessary to carry on its
business on and after January 1, 2000 as such business is presently
conducted.
3.15 Tangible Assets. The buildings, machinery, equipment, and
other tangible assets owned or leased by the Seller are reasonably
sufficient for the conduct of the Seller's businesses as presently
conducted. To Seller's Knowledge, each such tangible asset is in reasonably
good operating condition and repair (subject to normal wear and tear). The
Acquired Assets are all or
<PAGE> -17-
substantially all of the property of the Seller that can reasonably be
regarded as being necessary for the Buyer to carry on the Seller's business.
3.16 Inventory. The Seller's inventory consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and
finished goods reasonably expected to be used in the Ordinary Course of
Business, subject only to the reserve for inventory write-down as reflected
in the Most Recent Balance Sheet, as adjusted for the passage of time
through the Closing Date in accordance with GAAP.
3.17 Contracts. Section 3.17 of the Disclosure Schedule lists the
following contracts and other agreements to which the Seller is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, or involve
consideration in excess of $50,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or noncompetition, or
which otherwise restricts in any material manner the free use by the Seller
of its assets or data made available to it in the Ordinary Course of
Business;
(f) any agreement with any of the Stockholder or any Affiliates
thereof (other than the Seller);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other Benefit Plan for
the benefit of the Seller's current or former directors, officers, and
employees, or for which the Seller may otherwise be solely or jointly
liable;
(h) any Collective Agreement;
(i) any agreement for the employment or the engagement of any
individual on a full-time, part-time, consulting, or other basis providing
annual compensation in excess of $10,000 or providing severance benefits or
notice other than such as results by law from the employment of an employee
without an agreement as to notice or severance;
<PAGE> -18-
(j) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary Course
of Business;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Seller; or
(l) all contracts to which the Stockholder or its Affiliates (other
than the Seller) is a party and which provides a material benefit or
detriment to the Seller; or
(m) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in Section 3.17 of the
Disclosure Schedule. With respect to each agreement required to be
identified in Section 3.17 of the Disclosure Schedule: (w) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (x) the
agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (y) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration,
under the agreement; and (z) neither the Stockholder nor the Seller nor, to
the Seller's or the Stockholder's Knowledge, any other party has repudiated
any provision of the agreement.
3.18 Notes and Accounts Receivable. All notes and accounts
receivable of the Seller are reflected properly on its books and records,
and are receivables incurred in the Ordinary Course of Business, subject
only to the reserve for bad debts and returns and allowances reflected in
the Most Recent Balance Sheet, as adjusted for the passage of time through
the Closing Date in accordance with GAAP.
3.19 Powers of Attorney and Banking Matters. There are no
outstanding powers of attorney executed on behalf of the Seller. Section
3.19 of the Disclosure Schedule sets forth and describes all arrangements
which the Seller has with any banking institution, and identifies the Person
or Persons authorized to make deposits, withdrawals, or otherwise take
actions in respect thereof.
3.20 Insurance. Section 3.20 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, automobile, casualty, liability, umbrella and
bond and surety arrangements) to which the Seller has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since July 1,
1993:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
<PAGE> -19-
(c) the policy number and the period of coverage;
(d) the general type of coverage (including an indication of
whether the coverage was on a claims made, occurrence, or other basis) and
amount (including any deductibles and ceilings) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each insurance policy required to be disclosed in Section
3.20 of the Disclosure Schedule: (i) the policy is legal, valid, binding,
and enforceable by and in favor of the Seller, and in full force and effect;
(ii) the policy will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, and will provide coverage to the
Seller following the Closing Date for claims relating to the period prior to
the Closing Date; (iii) neither the Stockholder nor the Seller nor, to the
Seller's or the Stockholder's Knowledge, any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no
party to the policy has repudiated any provision thereof. Section 3.20 of
the Disclosure Schedule describes any self-insurance or co-insurance
arrangements affecting the Seller.
3.21 Workers' Compensation. All levies, assessments, penalties,
charges, surcharges or other amounts due pursuant to applicable workers'
compensation legislation in jurisdictions in which the Seller carries on
business have been paid by the Seller and the Seller has not been reassessed
in any material respect under any such legislation during the past five
years. The Seller has conducted its business and is in compliance with all
such applicable workers' compensation legislation.
3.22 Litigation. Section 3.22 of the Disclosure Schedule sets
forth each instance in which the Seller (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge, or (ii) to the
Seller's or the Stockholder's Knowledge, is a party or is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, provincial, local, or foreign jurisdiction or before any
arbitrator.
3.23 Product Warranty. To Seller's Knowledge, each product
manufactured, sold, leased, or delivered by the Seller has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Seller has no Liability for replacement or
repair thereof or other damages in connection therewith, subject only to the
reserve for product warranty claims set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage
of time through the Closing Date in accordance with the Seller's past custom
and practice. Section 3.23 of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for the Seller (containing
applicable guaranty, warranty, and indemnity provisions).
<PAGE> -20-
3.24 Product Liability. To the Seller's or the Stockholder's
Knowledge, the Seller has no Liability arising out of any injury to
individuals or property as a result of the ownership, possession, or use of
any product manufactured, sold, leased, or delivered by the Seller.
3.25 Employees. To the Seller's Knowledge, and to the Knowledge of
any employee of the Seller or the Stockholder with functional responsibility
for employment matters, no executive, key employee, or group of employees
has any plans to terminate employment with the Seller. The Seller is in
compliance with all laws respecting employment and employment practices,
terms and conditions of employment, and pay equity. All obligations,
commitments and amounts due for all salary, severance amounts, wages,
bonuses, commissions, vacations with pay, and Benefit Plans have been paid
or accrued. Section 3.25 of the Disclosure Schedule contains a correct and
complete list of each employee employed by the Seller, whether actively at
work or not, their salary, wage rate, position, age, status as full time or
part time employee, length of service and whether or not any employee is
currently absent from employment, the reason therefor, the date such leave
commenced and the expected date of return to work, if known. Except as
disclosed in Section 3.25 of the Disclosure Schedule, no employee of the
Seller has any agreement as to length of notice or severance payment
required to terminate his or her employment other than such as results by
law from the employment of an employee without an agreement as to notice or
severance. No collective bargaining agreement is currently being negotiated
by the Seller with respect to any of its employees and the only collective
agreements in force with respect to such employees are the Collective
Agreements, true, correct and complete copies of which have been provided to
the Buyer and are listed on Section 3.25of the Disclosure Schedule. No
notice has been received by the Seller of any complaint filed by any
employee against the Seller claiming a violation of labour relations
legislation and, to the Knowledge of the Seller, no complaint against the
Seller is pending before any labour relations board, arbitrator or other
adjudicator. No trade union or Person has applied to have the Seller
declared a related employer pursuant to labour relations legislation or
employment standards legislation in any jurisdiction in which the Seller
carries on business. The Seller has not experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Seller has not committed any unfair labor practice. None of
the Stockholder and the directors and officers (and employees with
responsibility for employment matters) of the Seller has any Knowledge of
any organizational effort presently being made or threatened by or on behalf
of any trade union with respect to employees of the Seller.
3.26 Employee Benefits.
(a) Section 3.26 of the Disclosure Schedule lists each Benefit Plan
that either of the Seller or the Stockholder maintains or to which the
Seller or the Stockholder contributes, and in which employees or former
employees of the Seller participate.
(b) All of the Benefit Plans are and have been established, registered,
qualified, invested and administered, in all respects, in accordance with all
applicable Benefit Laws. No fact or circumstance exists that could adversely
effect the tax exempt status of any Benefit Plan.
<PAGE> -21-
(c) All obligations regarding the Benefit Plans have been satisfied, there
are no outstanding defaults or violations by any party to any Benefit Plan and
no taxes, penalties or fees are owing or exigible under any of the Benefit
Plans.
(d) No Benefit Plan nor any related trust or other funding medium
thereunder is subject to any pending investigation, examination or other
proceeding, action or claim initiated by any governmental agency or
instrumentality, or by any other party (other than routine claims for
benefits), and there exists no state of facts which after notice or lapse of
time or both could reasonably be expected to give rise to any such
investigation, examination or other proceeding, action or claim or affect the
registration of any Benefit Plan required to be registered.
(e) All contributions or premiums required to be made by the Seller or the
Stockholder, as the case may be, under the terms of each Benefit Plan or by
applicable Benefit Laws, have been made in a timely fashion in accordance with
applicable Benefit Laws and the terms of the Benefit Plans.
(f) No amendments have been made to any Benefit Plan, no improvements to
any Benefit Plan have been promised and no amendments or improvements to any
Benefit Plan will be made or promised prior to the Closing Date.
(g) There have been no improper withdrawals, applications or transfers of
assets from any Benefit Plan or the trust or funding media relating thereto.
(h) The Seller has furnished to the Buyer true, correct and complete
copies of all of the Benefit Plans together with all related documentation
including, without limitation, funding agreements, actuarial reports, funding
and financial information returns and statements, all professional opinions
(whether or not internally prepared) with respect to such Benefit Plans, all
material internal memoranda concerning the Benefit Plans, copies of material
correspondence with all regulatory authorities with respect to each Benefit
Plan and plan summaries, booklets and personnel manuals. No material changes
have occurred to any of the Benefit Plans or are expected to occur which would
affect the actuarial reports or financial statements required to be provided
to the Buyer pursuant to this provision.
(i) Each Benefit Plan, which is a funded plan is fully funded as of the
Closing Date on both a going concern and a solvency basis pursuant to the
actuarial assumptions and methodology utilized in the most recent actuarial
evaluations therefore.
(j) None of the Benefit Plans enjoys any special tax status under
applicable Benefit Laws, nor have any advance tax rulings been sought or
received in respect of any of the Benefit Plans.
(k) All employee data necessary to administer each of the Benefit Plans
has been provided to the Buyer and is true and correct as of the date of this
Agreement and the Buyer will be notified of any changes thereto.
<PAGE> -22-
(l) No insurance policy or any other contract or agreement affecting any
Benefit Plan requires or permits a retroactive increase in contributions,
premiums or payments due thereunder. The level of insurance reserves under
each insured Benefit Plan is reasonable and sufficient to provide for all
incurred but unreported claims.
(m) Except as disclosed in Section 3.26 of the Disclosure Schedule or
pursuant to a pension plan, none of the Benefit Plans provides benefits to
retired employees or to the beneficiaries or dependents of retired employees.
3.27 Guaranties. The Seller is not a guarantor or co-borrower in
respect of any Liability or obligation, and is not otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
3.28 Environment, Health, and Safety.
(a) Each of the Seller and its predecessors and Affiliates has
complied with all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, each of the Seller and its predecessors and Affiliates has
obtained and been in compliance with all of the terms and conditions of all
permits, licenses, and other approvals which are required under, and has
complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental, Health, and Safety
Laws.
(b) the Seller has no Liability for damage to any site, location,
or body of water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(c) None of the real property owned by the Seller has ever been
used by any Person for the disposal of waste, as a waste disposal site or as
a licensed landfill, and there are no underground storage tanks on any
premises owned by or leased to the Seller.
(d) All properties and equipment used in the business of the
Seller, its predecessors and Affiliates have been free of PCBs, methylene
chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, hazardous or toxic substances and, to the Seller's Knowledge
and the Knowledge of any employee of the Seller or the Stockholder with
functional responsibility for environmental or health and safety matters,
asbestos which is friable or otherwise requires removal or notification of
any hazard to any Person.
(e) The Seller has not been required by any governmental entity to
(i) alter any of the real property owned by the Seller in a material way in
order to be in compliance with Environmental, Health and Safety Laws, or
(ii) perform any
<PAGE> -23-
environmental closure, decommissioning, rehabilitation, restoration or post-
remedial investigations, on, about or in connection with any real property.
(f) Schedule 3.28 lists all reports and documents relating to the
environmental matters affecting the Seller or any of the Acquired Assets
which are in the possession or under the control of the Seller. Copies of
all such reports and documents have been provided to the Buyer. To the
knowledge of the Seller, there are no other reports or documents relating to
environmental matters affecting the Seller or any of the Acquired Assets
which have not been made available to the Buyer whether by reason of
confidentiality restrictions or otherwise.
3.29 Certain Business Relationships with the Seller. None of the
Stockholder and its Affiliates (other than the Seller) are involved in any
business arrangement or relationship with the Seller, the continuation of
which is material to the business and operations of the Seller, and none of
the Stockholder and its Affiliates (other than the Seller) owns any asset,
tangible or intangible, which is used in the business of the Seller and is
material to the business and operations of the Seller. There are no
intercompany obligations between the Seller and the Stockholder other than
indebtedness for money borrowed from the Stockholder consistent with past
practice.
3.30 Disclosure. The representations and warranties contained in
this Article III do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this Article III not misleading.
3.31 GST Registration. The Seller is registered for purposes of
Part IX of the Excise Tax Act. The Seller's GST Registration Number is
R122809544. At or prior to the Closing, the Seller shall have made and
delivered to the Buyer a schedule of all or substantially all of the
property used by the Seller in a commercial activity that forms all or part
of its business.
ARTICLE IV
Representations and Warranties of the Buyer AND NEBS
The Buyer and NEBS represent and warrant to the Seller that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV).
4.01 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of Ontario.
4.02 Authorization of Transaction. Each of the Buyer and NEBS has full
power and authority to execute and deliver this Agreement and the Related
Agreements to which it is or may become a party and to perform its
obligations hereunder and thereunder. This Agreement and the Related
Agreements to which the Buyer and NEBS are or may become a party constitute
<PAGE> -24-
(or will constitute when executed and delivered) the valid and legally
binding obligations of the Buyer and NEBS, enforceable in accordance with
their respective terms and conditions. Neither the Buyer nor NEBS needs to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Article II above).
4.03 Noncontravention. Neither the execution and the delivery of this
Agreement and the Related Agreements, nor the consummation of the
transactions contemplated hereby or thereby (including the assignments and
assumptions referred to in Article II above), will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Buyer is subject or any provision of its
charter or bylaws or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its
assets is subject, except that the consent of the lender of an Affiliate of
the Buyer is required.
4.04 Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
4.05 GST Registration. The Buyer is registered for purposes of Part IX
of the Excise Tax Act. The Buyer's GST Registration Number is
103,845,111RT0001.
4.06 Sole Stockholder. NEBS is the sole stockholder of the Buyer and as
such has the power to cause the Buyer to perform hereunder.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
5.01 General. Each of the Parties will use its commercially
reasonable efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Article VII below).
5.02 Notices and Consents. The Stockholder will cause the Seller
to give any notices to third parties, and will cause the Seller to use its
commercially reasonable efforts to obtain any third party consents, that the
Buyer may request in connection with the matters referred to in Section 3.03
above. Each of the Parties will (and the Stockholder will cause the Seller
to) give any notices to, make any filings with, and use its best efforts to
obtain any authorizations,
<PAGE> -25-
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Section 3.02 and Section 3.03
above including the filing of any notice pursuant to the Investment Canada
Act or in connection with Competition Act matters.
5.03 Operation of Business. The Stockholder will cause the Seller
to conduct its operations in the Ordinary Course of Business and not cause
or permit the Seller to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Stockholder will not cause or
permit the Seller to engage in any practice, take any action, or enter into
any transaction of the sort described in Section 3.09 above.
5.04 Preservation of Business. The Stockholder will cause the
Seller to use commercially reasonably efforts to keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
5.05 Full Access. The Buyer agrees to maintain in a reasonably
accessible place its books and records; to provide the Seller and the
Stockholder and their representatives reasonable access to such books and
records at reasonable times, in a manner so as not to interfere with the
normal business operations of the Buyer; and to provide copies of such books
and records to the Seller and the Stockholder, at the Seller's and
Stockholder's expense. The Stockholder will permit, and the Stockholder
will cause the Seller to permit, representatives of the Buyer and its
lenders to have full access to all premises, properties (including
subsurface testing), personnel, books, records (including Tax records),
contracts, and other documents, data, of or pertaining to the Seller. The
Seller will provide the Buyer with such copies of such documents as the
Buyer shall reasonably request. Until such time as a Closing occurs
hereunder, the Buyer will treat and hold as such any Confidential
Information it receives from any of the Seller and the Stockholder in the
course of the reviews contemplated by this Section 5.05, will not use any of
the Confidential Information except in connection with this Agreement, and
if this Agreement is terminated for any reason whatsoever, will return to
the Seller or the Stockholder, as the case may be, all tangible embodiments
(and all copies) of the Confidential Information which are in its
possession.
5.06 Notice of Developments. The Stockholder will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in Article III above,
and the Buyer will give prompt written notice to the Stockholder of any
material adverse development causing a breach of any of the representations
and warranties in Article IV above. No disclosure by any Party pursuant to
this Section 5.06, however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.07 Exclusivity. The Stockholder will not (and the Stockholder
will not cause or permit the Seller to) (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, the Seller (including any acquisition
structured as an
<PAGE> -26-
amalgamation, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort
or attempt by any Person to do or seek any of the foregoing. The Stockholder
will not vote in favor of any such acquisition structured as an
amalgamation, consolidation, or share exchange. The Stockholder will notify
the Buyer immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
5.08 Employee Matters.
(a) The arrangements of the Seller and Stockholder and the Buyer in
respect of the Benefit Plans are described in Exhibit I.
(b) The Seller agrees to provide the Buyer with an up-to-date list of
the names of all employees of the Buyer at least two (2) and not more than
four (4) Business Days prior to the Closing Date. The Buyer agrees that it
shall offer employment to all employees effective as of the Closing Date on
substantially similar terms and conditions of employment as then applicable
to such employees.
5.09 Clearance Certificate. The Seller shall provide a clearance
certificate or other similar documentary evidence from the workers'
compensation authority in Ontario, and shall request such certificates or
other evidence from the workers' compensation authority in each jurisdiction
where the Seller carries on business, certifying that there are no outstanding
assessments, penalties, fines, levies, charges, surcharges or other amounts
due or owing to those authorities.
5.10 Election. The Seller and Buyer shall execute an election as
to the sale of accounts receivable under Section 22 of the ITA or any
similar legislation and an election as to goods and services taxes under
Section 167 of the Excise Tax Act or any similar legislation.
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
6.01 General. In case at any time after the Closing any further
action is necessary or desirable to effectively transfer and assign to, and
vest in, the Buyer each of the Acquired Assets, or otherwise to carry out
the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled
to indemnification therefor under Article VIII below). After the Closing
the Stockholder will cause the Seller and the Seller's professional advisors
and agents to cooperate with the Buyer to permit the Buyer to (i) enjoy the
Seller's rating and benefits under the workman's compensation laws of
applicable jurisdictions, to the extent
<PAGE> -27-
permitted by such laws, and (ii) file on a timely basis all reports required
to be filed with any government or governmental agency.
6.02 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement, or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Seller, each of the other Parties
will cooperate with it and its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article VIII below).
6.03 Transition. Neither the Seller nor the Stockholder will take
any action that is designed or intended to have the effect of discouraging
any lessor, licenser, customer, supplier, or other business associate of the
Seller from maintaining the same business relationships with the Seller
after the Closing as it maintained with the Seller prior to the Closing.
6.04 Confidentiality. For a period of three years from and after
the Closing Date, the Stockholder will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in its possession. In the event that the Stockholder is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Stockholder
will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 6.04. If, in the absence of a protective order or
the receipt of a waiver hereunder, the Stockholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, the Stockholder may disclose the
Confidential Information to the tribunal; provided, however, that the
Stockholder shall use its best efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
6.05 Covenant Not to Compete. For a period of three years from and
after the Closing Date, neither the Stockholder nor any Affiliate of the
Stockholder will engage directly or indirectly in any business that the
Seller conducts as of the Closing Date in any geographic area in which the
Seller conducts that business as of the Closing Date; provided, however,
that no owner of less than 1% of the outstanding stock of any publicly
traded corporation shall be deemed to engage solely by reason thereof in any
of its businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6.05 is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or
<PAGE> -28-
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
6.06 Use of Intellectual Property. The Seller and the Stockholder
acknowledge and agree that as a result of the consummation of the
transactions contemplated hereby, the Buyer is acquiring the exclusive right
to use the Intellectual Property owned or used by the Seller immediately
prior to the Closing Date, including the names "McBee" and "McBee Systems,"
for which the Seller and the Stockholder will receive full and adequate
consideration, and that neither the Stockholder, any Affiliate of the
Stockholder, nor the Seller will use such Intellectual Property or such
names or any similar names subsequent to the Closing. Immediately following
the Closing the Stockholder will cause the Seller to change its name to
"8424433 Inc.".
6.07 Access to Books and Records. Subject to the following
sentence, during the Access Period the Buyer agrees to maintain in a
reasonably accessible place the books and records of the Seller delivered to
it at Closing; to provide the Stockholder and its representatives reasonable
access to such books and records at reasonable times, in a manner so as not
to interfere with the normal business operations of the Buyer; and to
provide copies of such books and records to the Stockholder at the
Stockholder's expense. If at any time during the Access Period the Buyer
wishes to dispose of such books and records, the Buyer agrees to give the
Stockholder sixty days' prior notice of such disposition, and to deliver
such books and records to the Stockholder, at the Stockholder's expense,
should the Stockholder so request during such 60 day period. With respect
to books and records retained by the Seller at the Closing, the Stockholder
agrees to give the Buyer the same access during the Access Period and the
same notice and rights in the event of any proposed disposition thereof.
6.08 Severance. For a period of twelve (12) months following the
Closing, the Buyer shall pay severance to those employees of the Seller
identified on Exhibit C attached hereto and whose employment is terminated
by the Buyer after the Closing Date, on the terms and in the amounts
described in such Exhibit C.
6.09 Clearance Certificates. The Seller or the Stockholder shall
deliver to the Buyer, as soon as available, the clearance certificates or
other documentary evidence from the workers' compensation authority in each
jurisdiction, other than Ontario, where the Seller carries on business as of
the date hereof, as described in Section 5.09.
<PAGE> -29-
ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
7.01 Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article III
above (taken collectively and individually) shall be true and correct in all
material respects (and each of the representations and warranties contained
in Sections 3.06, 3.10 and 3.28 shall be true in all respects) at and as of
the Closing Date, as though made again at and as of such date, without
giving any effect to any amendment of the Disclosure Schedule delivered to
the Buyer after the date of this Agreement;
(b) each of the Stockholder and the Seller shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(c) the Seller shall have procured all of the third party consents
specified in Section 5.02 above, the Seller shall have been released from
any Liability with respect to the loan arrangements with the Colorado
National Bank (and all Security Interests in connection therewith shall be
discharged) and the guaranties of any obligations of the Stockholder, and
all employees of the Seller shall have been released from any obligations to
the Stockholder or any Affiliate of the Stockholder (other than the Seller)
in respect of noncompetition covenants;
(d) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
province, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (iii) affect adversely the right of
the Buyer to own Acquired Assets, or (iv) have a Material Adverse Effect on
the right of the Buyer to operate the Seller's businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(e) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section 7.01(a)
through (d) is satisfied in all respects;
(f) the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to
in Section 3.03, 4.02 and 4.03 above including evidence satisfactory to the
Buyer that the purchase and sale of the Acquired Assets shall be in
compliance with the provisions of all relevant bulk sales Laws;
<PAGE> -30-
(g) a certificate of payment issued by the Minister of Revenue of
Ontario under Section 6 of the Retail Sales Act (Ontario) or similar
legislation in other relevant provinces (if applicable) to the effect that
all requisite taxes under such Act and similar legislation relating to the
Acquired Assets (other than relating to the conveyance and transfer of the
Acquired Assets to the Buyer) have been paid by the Seller;
(h) [omitted];
(i) the Seller shall have obtained all necessary consents under the
Planning Act (Ontario) for the conveyance of the any real property owned by
the Seller to the Buyer prior to Closing;
(j) the Seller's Secretary shall have executed and delivered to the
Buyer a certificate in form and substance as set forth in Exhibit D attached
hereto regarding the Seller's charter, by-laws, authorizing resolutions, and
incumbency of officers;
(k) the Seller and the Buyer shall have executed and delivered the
Bill of Sale and Assumption of Liabilities attached hereto as Exhibit E, and
all additional transfer documents required to validly assign to the Buyer,
in recordable form, all Intellectual Property of the Seller;
(l) the Seller shall deliver to the Buyer a good standing
certificate issued by the Province of Ontario, and a certificate of good
standing issued by the Ministry of Consumer and Commercial Relations of each
province in which the Seller is qualified to do business as a foreign
corporation;
(m) the Seller shall have delivered to the Buyer releases of any
Security Interests identified in Section 3.05 of the Disclosure Schedule,
together with termination statements, discharges and the like in recordable
form;
(n) the Seller shall have delivered to the Buyer releases from any
guarantees of indebtedness for borrowed money identified in Section 3.16 of
the Disclosure Schedule or from any guarantees identified in Section 3.25 of
the Disclosure Schedule;
(o) the relevant parties shall have entered into side agreements in
form and substance as set forth in Exhibit F attached hereto, and the same
shall be in full force and effect;
(p) the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in Exhibit G attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(q) an Affiliate of the Buyer shall have obtained, on terms and
conditions satisfactory to it in its sole discretion, all of the financing
it needs in order to consummate the transactions contemplated hereby on and
after the Closing Date;
<PAGE> -31-
(r) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire all the capital
stock of McBee Systems, Inc.;
(s) the Buyer's Board of Directors shall have received a fairness
opinion from Tucker Anthony regarding the transactions contemplated herein
and in the Stock Agreement, in form and substance satisfactory to such Board
of Directors in its sole discretion;
(t) the Buyer shall have satisfied itself, in its sole discretion,
that both the remedial actions planned to be taken by the Seller to become
Year 2000 Compliant, and the person and dollar budget described in
connection therewith, as set forth in Section 3.14(f) of the Disclosure
Schedule, are adequate;
(u) all actions to be taken by the Seller and the Stockholder in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be satisfactory in form and
substance to the Buyer; and
(v) the Buyer shall deliver to the Seller at the Closing all prescribed
forms with respect to the election required in Section 7.02(j) and a
statutory declaration that the Buyer is registered for purposes of the
Excise Tax Act under registration number 103,845,111RT0001.
The Buyer may waive any condition specified in this Section 7.01 if it
executes a writing so stating at or prior to the Closing.
7.02 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
above shall be true and correct in all material respects at and as of the
Closing Date, as though made again at and as of such date;
(b) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
<PAGE> -32-
(d) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section 7.02(a)
through (c) is satisfied in all respects;
(e) the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to
in Section 3.03, 4.02, and 4.03 above;
(f) the relevant parties shall have entered into side agreements in
form and substance as set forth in Exhibit F attached hereto, and the same
shall be in full force and effect;
(g) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit H attached hereto,
addressed to the Seller, and dated as of the Closing Date;
(h) concurrent with the consummation of the transactions
contemplated hereby, an Affiliate of the Buyer shall acquire all the capital
stock of McBee Systems, Inc.; and
(i) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Seller.
The Seller or the Stockholder may waive any condition specified in this
Section 7.02 if it executes a writing so stating at or prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.01 Survival of Representations and Warranties. All of the
representations and warranties of the Seller and the Stockholder contained
in Sections 3.01 through 3.11 and 3.13 through 3.30 of this Agreement shall
survive the Closing hereunder (even if the Buyer knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two years thereafter. All
of the other representations and warranties of the Parties contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
the Closing) and continue in full force and effect, subject to any
applicable statutes of limitations.
8.02 Indemnification Provisions for Benefit of the Buyer.
(a) In the event that the Seller or the Stockholder breaches (or in the
event any third party alleges facts that, if true, would mean the Seller or
the Stockholder has breached) any of its
<PAGE> -33-
representations, warranties, or covenants contained herein, provided that
the Buyer makes a written claim for indemnification against the Seller
pursuant to Section 10.07 below, then the Seller and the Stockholder jointly
and severally agree to protect, defend, hold harmless and indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach), including all Adverse
Consequences arising out of the enforcement of this Section 8.02; provided,
however, that, subject to clause 8.02(c) below, the Seller and the
Stockholder shall have no obligation to compensate the Buyer in respect of
any Adverse Consequences resulting from any breaches or alleged breaches of
the representations and warranties contained in Article III of this
Agreement (other than breaches or alleged breaches of the representations
and warranties contained in Section 3.12 above with respect to federal and
provincial income taxes of the Seller, for which the Buyer will be fully
compensated), until the Buyer has suffered Adverse Consequences in the
aggregate, by reason of all such breaches arising under this Agreement and
all applicable breaches arising under the Stock Purchase Agreement, in
excess of $1,200,000, at which point the Seller will be obligated to
indemnify the Buyer from and against all Adverse Consequences in excess of
that amount.
(b) The Seller and the Stockholder shall indemnify the Buyer in full for
any Adverse Consequences (i) arising from circumstances disclosed on the
clearance certificates or other similar documentary evidence described in
Section 5.09 hereof, where any such certificate or other evidence is
delivered after the Closing, and (ii) arising from or related to any action,
suit, arbitration, proceeding, hearing, or investigation to which the Seller
is a party, including, without limitation, the matters listed in Section
3.22 of the Disclosure Schedule.
(c) The Seller and the Stockholder shall indemnify the Buyer in full for
any Adverse Consequences arising from the failure of the Parties to comply
with any applicable bulk sales laws in respect of the transactions
contemplated by this Agreement, unless such Adverse Consequences arise as a
result of the Buyer's failure to pay an Assumed Liability.
8.03 Indemnification Provisions for Benefit of the Seller and
Stockholder. In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached) any of
its representations, warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to Section 8.01 above,
provided that the Seller makes a written claim for indemnification against
the Buyer pursuant to Section 10.07 below within such survival period, then
the Buyer agrees to protect, defend, hold harmless and indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after the end of
any applicable survival period) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged breach), including
all Adverse Consequences arising out of the enforcement of this Section
8.04; provided, however, that the Buyer shall not have any obligation to
compensate the Seller in respect of any Adverse Consequences resulting from
any breaches or alleged breaches of the representations and warranties
contained in Article IV of this Agreement until the Seller has suffered
Adverse Consequences in the aggregate, by reason of all such breaches
arising under this Agreement and all applicable breaches arising under the
Stock Purchase Agreement, in
<PAGE> -34-
excess of $1,200,000, at which point the Buyer will be obligated to
indemnify the Seller from and against all Adverse Consequences in excess of
that amount.
8.04 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article VIII, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 30
calendar days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim (it being understood by the Parties
that the Indemnified Parties may take such actions as are reasonable in
connection with its defense until it receives such notice from the
Indemnifying Party), (ii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, and
(iii) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party; provided, however, that if the
Indemnified Party is covered, in whole or in part, by an insurance policy
with respect to any Third Party Claim, then the Indemnifying Party's defense
against such Third Party Claim shall be limited or precluded as required by
the terms of the applicable insurance policy.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.04(b) above, and subject
to the provisions of any applicable insurance policies of the Indemnified
Party, (i) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
<PAGE> -35-
(d) In the event any of the conditions in Section 8.04(b) above is
or becomes unsatisfied, or if otherwise required under the terms of any
applicable insurance policy of the Indemnified Party (i) the Indemnified
Party may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii)
the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article VIII.
8.05 Indemnification for the Benefit of the Buyer After Closing. In
addition to the rights of the Buyer set forth herein, if the Seller or the
Stockholder (i) refuses to assume a third-party claim within the time
periods set forth in this Article VIII, (ii) fails to provide reasonable
evidence (such as a payment or performance bond), within 30 calendar days
after receiving a written claim, that it is financially or otherwise able to
pay in full the amount set forth in such claim, (iii) fails to pay amounts
due under this Article VIII as agreed by the Parties or as determined by a
court of competent jurisdiction or (iv) has ceased to exist as a corporate
entity, the Buyer has rights of indemnification for breaches after the
Closing by the Seller or the Stockholder of any of its representations,
warranties or covenants herein as set forth in the Seller Stockholders
Agreement.
8.06 Determination of Adverse Consequences. All indemnification
payments under this Article VIII shall be deemed adjustments to the Final
Purchase Price, and the Parties agree that they will not take any positions
or other actions (including reporting adjustments on their applicable Tax
Returns) inconsistent with this treatment. No Final Purchase Price
adjustment pursuant to Section 2.05, however, will be subject to the
provisions of Article VIII to the extent of the amount of such adjustment.
8.07 Exclusive Remedy. Except as set forth in this Section 8.07 or
in the Seller Stockholders Agreement, or in the Lease Agreement, the
indemnification provided in this Article VIII shall be the sole and
exclusive remedy for any inaccuracy or breach of any representation,
warranty or covenant made by any Party in this Agreement. Nothing herein
shall limit any party's remedy for fraud or intentional breach of covenant,
and any rights any Party may have under the Seller Stockholders Agreement or
the Lease Agreement. The foregoing indemnification provisions are in
addition to, and not in derogation of, any equitable remedy any Party may
have for breach of any covenant.
ARTICLE IX
TERMINATION
9.01 Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
<PAGE> -36-
(a) the Buyer and the Stockholder may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice
to the Stockholder at any time prior to the Closing if the Buyer is not
satisfied with the results of its continuing business, legal, and accounting
due diligence regarding the Seller;
(c) the Buyer may terminate this Agreement by giving written notice
to the Stockholder at any time prior to the Closing (i) in the event the
Seller or the Stockholder has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
the Buyer has notified the Stockholder of the breach, and the breach has
continued without cure until the earlier of the Closing or 30 days after the
notice of breach, or (ii) if the Closing shall not have occurred on or
before June 26, 1998, by reason of the failure or inability to satisfy any
condition precedent under Section 7.01; and
(d) the Stockholder may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Stockholder has
notified the Buyer of the breach, and the breach has continued without cure
until the earlier of the Closing or 30 days after the notice of breach, or
(ii) if the Closing shall not have occurred on or before June 26, 1998, by
reason of the failure of any condition precedent under Section 7.02.
9.02 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.01 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach).
ARTICLE X
MISCELLANEOUS
10.01 Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the Buyer and the Stockholder; provided, however, that
any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing agreement concerning its publicly-
traded securities (in which case the disclosing Party will use commercially
reasonable efforts to advise the other Parties prior to making the
disclosure).
10.02 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
10.03 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings,
<PAGE> -37-
agreements, or representations by or among the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
10.04 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Stockholder;
provided, however, that the Buyer may (i) assign any or all of its rights
and interests hereunder to one or more of its Affiliates and (ii) designate
one or more of its Affiliates to perform its obligations hereunder (in any
or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
10.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.06 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.07 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Stockholder
or to the Seller: ROMO Corp.
7333 West Jefferson, Suite 210
Lakewood, Colorado 80235
Attn: H. Rex Martin, President
with a copy to: Lentz, Evans & King
Lincoln Center Building, Suite 2000
1660 Lincoln Street
Denver, Colorado 80264
Attn: Francis P. King, Esq.
If to the Buyer: New England Business Service, Inc.
500 Main Street
Groton, Massachusetts 01471
Attn: John F. Fairbanks, Vice President
<PAGE> -38-
with a copy to: Hill & Barlow
One International Place
Boston, Massachusetts 02110
Attn: Terrence W. Mahoney, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
10.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule (whether of The Commonwealth of Massachusetts or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than The Commonwealth of Massachusetts.
10.09 Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed
by the Buyer, the Stockholder and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
10.11 Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
10.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, provincial, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or
<PAGE> -39-
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
10.13 Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
10.14 Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or Canada or any
state or province thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10.15 below), in
addition to any other remedy to which they may be entitled, at law or in
equity.
10.15 Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Suffolk County,
Massachusetts, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any defense
of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be
required of any other Party with respect thereto. Any Party may make
service on any other Party by sending or delivering a copy of the process to
the Party to be served at the address and in the manner provided for the
giving of notices in Section 10.07 above. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and may
be enforced by suit on the judgment or in any other manner provided by law
or at equity.
* * * * *
[END OF PAGE - SIGNATURE PAGE IMMEDIATELY FOLLOWS]
<PAGE> -40-
IN WITNESS WHEREOF, the Parties hereto have executed this Asset
Purchase Agreement as an instrument under seal on the date first above
written.
NEW ENGLAND BUSINESS SERVICE, INC.
By:/s/ John F. Fairbanks
------------------------------------
Title:
---------------------------------
NEBS BUSINESS FORMS LTD.
By:/s/ John F. Fairbanks
-------------------------------------
Title:
------------------------------------
ROMO CORP.
By:/s/ H. Rex Martin
-------------------------------------
Title: President
------------------------------------
McBEE SYSTEMS OF CANADA, INC.
By:/s/ H. Rex Martin
-------------------------------------
Title: Vice-President
------------------------------------
<PAGE> -41-
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
ARTICLE I DEFINITIONS 1
ARTICLE II PURCHASE AND SALE 7
2.01 Purchase and Sale of Assets. 7
2.02 Assumption of Liabilities. 7
2.03 Initial Cash Payment. 7
2.04 The Closing. 7
2.05 Adjustments to Initial Cash Payment. 7
2.07 Allocation. 7
2.07 Section 22 Election. 7
2.08 Transfer Taxes. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE STOCKHOLDER 8
3.01 Organization of the Seller. 8
3.02 Authorization of Transaction. 9
3.03 Noncontravention. 9
3.04 Residence. 9
3.05 Brokers' Fees. 9
3.06 Title to Assets. 9
3.07 Subsidiaries. 9
3.08 Financial Statements. 9
3.09 Events Subsequent to Most Recent Fiscal Year End. 10
3.10 Undisclosed Liabilities. 11
3.11 Legal Compliance. 12
3.12 Tax Matters. 12
3.13 Real Property. 13
3.14 Intellectual Property. 15
3.15 Tangible Assets. 17
3.16 Inventory. 18
3.17 Contracts. 18
3.18 Notes and Accounts Receivable. 19
3.19 Powers of Attorney and Banking Matters. 19
3.20 Insurance. 19
3.21 Workers' Compensation. 20
3.22 Litigation. 20
3.23 Product Warranty. 20
3.24 Product Liability. 21
3.25 Employees. 21
3.26 Employee Benefits. 21
3.27 Guaranties. 23
3.28 Environment, Health, and Safety. 23
3.29 Certain Business Relationships with the Seller. 24
3.30 Disclosure. 24
3.31 GST Registration 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEBS 24
4.01 Organization of the Buyer. 24
4.02 Authorization of Transaction. 24
4.03 Noncontravention. 25
4.04 Brokers' Fees. 25
4.05 GST Registration. 25
4.06 Sole Stockholder. 25
ARTICLE V PRE-CLOSING COVENANTS 25
5.01 General. 25
5.02 Notices and Consents. 25
5.03 Operation of Business. 26
5.04 Preservation of Business. 26
5.05 Full Access. 26
5.06 Notice of Developments. 26
5.07 Exclusivity. 26
5.08 Employee Matters 27
5.09 Clearance Certificate. 27
5.10 Election. 27
ARTICLE VI POST-CLOSING COVENANTS 27
6.01 General. 27
6.02 Litigation Support. 28
6.03 Transition. 28
6.04 Confidentiality. 28
6.05 Covenant Not to Compete. 28
6.06 Use of Intellectual Property. 29
6.07 Access to Books and Records. 29
6.08 Severance. 29
6.09 Clearance Certificates. 29
ARTICLE VII CONDITIONS TO OBLIGATION TO CLOSE 30
7.01 Conditions to Obligation of the Buyer. 30
7.02 Conditions to Obligation of the Seller. 32
-ii-
ARTICLE VIII REMEDIES FOR BREACHES OF THIS AGREEMENT 33
8.01 Survival of Representations and Warranties. 33
8.02 Indemnification Provisions for Benefit of the Buyer. 33
8.03 Indemnification Provisions for Benefit of the Seller
and Stockholder. 34
8.04 Matters Involving Third Parties. 35
8.05 Indemnification for the Benefit of the Buyer After Closing. 36
8.06 Determination of Adverse Consequences. 36
8.07 Exclusive Remedy. 36
ARTICLE IX TERMINATION 36
9.01 Termination of Agreement. 36
9.02 Effect of Termination. 37
ARTICLE X MISCELLANEOUS 37
10.01 Press Releases and Public Announcements. 37
10.02 No Third Party Beneficiaries. 37
10.03 Entire Agreement. 37
10.04 Succession and Assignment. 38
10.05 Counterparts. 38
10.06 Headings. 38
10.07 Notices. 38
10.08 Governing Law. 39
10.09 Amendments and Waivers. 39
10.10 Severability. 39
10.11 Expenses. 39
10.12 Construction. 39
10.13 Incorporation of Exhibits, Annexes, and Schedules. 40
10.14 Specific Performance. 40
10.15 Submission to Jurisdiction. 40
-iii-
EXHIBITS
Exhibit A Interim Balance Sheet (Section 2.05)
Exhibit B Seller's Financial Statements (Section 3.07)
Exhibit C Severance Arrangements (Section 6.08)
Exhibit D Seller's Secretary's Certificate (Section 7.01)
Exhibit E Bill of Sale and Assumption of Liabilities (Section 7.01)
Exhibit F Seller Stockholders Agreement (Section 7.01)
Exhibit G Opinion of Seller's counsel (Section 7.01)
Exhibit H Opinion of Buyer's counsel (Section 7.02)
Exhibit I Benefit Plans (Section 5.08)
-iv-
Exhibit 2.4
NEW ENGLAND BUSINESS SERVICE, INC.
500 Main Street
Groton, Massachusetts 01471
Agreement to Furnish Copies of Omitted Exhibits and Schedules to
Asset Purchase Agreement with ROMO Corp.
New England Business Service, Inc. (the "Registrant") is not
filing as exhibits to its Current Report on Form 8-K dated June
18, 1998, copies of the exhibits and schedules to the Asset
Purchase Agreement among the Registrant, NEBS Business Forms
Ltd., McBee Systems of Canada, Inc. and ROMO Corp. dated May 1,
1998, which Agreement is filed as Exhibit 2.3 thereto.
Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, copies of such omitted exhibits and
schedules.
Dated: June 18, 1998
NEW ENGLAND BUSINESS SERVICE, INC.
(Registrant)
By: /s/ John F. Fairbanks
-----------------------
John F. Fairbanks
VP, Chief Financial Officer
(Principal Financial and Accounting Officer)
FIRST AMENDMENT TO AMENDED AND RESTATED
---------------------------------------
REVOLVING CREDIT AGREEMENT
--------------------------
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated
as of May 29, 1998 (this "Amendment"), by and among NEW ENGLAND BUSINESS
SERVICE, INC. (the "Borrower"), a Delaware corporation having its principal
place of business at 500 Main Street, Groton, Massachusetts 01471, and the
Subsidiaries of the Borrower listed on the signature pages hereto (the
"Guarantors"), BANKBOSTON, N.A., a national banking association ("BKB"), and
the other lending institutions listed on Schedule 1 to the Credit Agreement
referred to below (together with BKB, the "Banks"), BANKBOSTON, N.A., as
agent for itself and such other lending institutions (the "Agent"), and FLEET
NATIONAL BANK, as documentation agent for itself and such other lending
institutions.
WHEREAS, the Borrower, the Banks and the Agent are parties to an Amended
and Restated Revolving Credit Agreement, dated as of December 18, 1997 (as
amended and in effect from time to time, the "Credit Agreement," capitalized
terms defined therein having the same meanings herein as therein), pursuant
to which the Banks have extended credit to the Borrower on the terms and
subject to the conditions set forth therein;
WHEREAS, subject to the terms and conditions set forth herein, the
Borrower, the Banks, and the Agent have agreed to amend the Credit Agreement
as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. Amendments to Definitions. Section 1.1 of the Credit Agreement
is hereby amended by:
(a) adding the following new definitions to Section 1.1 of the Credit
Agreement in the proper alphabetical order:
"First Amendment Effective Date. The "Effective Date", as defined
in the First Amendment to Amended and Restated Revolving Credit
Agreement, dated as of May 29, 1998 among the Borrower, the Agent, the
Documentation Agent, the Banks, and the Subsidiaries of the Borrower
listed on the signature pages thereto.
<PAGE>
-2-
McBee. McBee Systems, Inc., a Colorado corporation.
McBee Acquisition. The acquisition by the Borrower (or an
affiliate of the Borrower) of one hundred percent (100%) of the capital
stock of McBee and its Subsidiaries and the acquisition of certain
assets from McBee Canada on the terms and conditions set forth below:
(i) the closing of the McBee Acquisition shall occur on or
before, but not after, June 30, 1998;
(ii) the terms and conditions of the McBee Acquisition shall be
substantially those set forth in the McBee Asset Purchase Agreement and
the McBee Stock Purchase Agreement. Without limiting the generality of
the foregoing, (A) the Initial Cash Payment (as defined in the McBee
Asset Purchase Agreement ) shall not exceed $5,000,000, (B) the Initial
Purchase Price (as defined in the McBee Stock Purchase Agreement) shall
not exceed $58,000,000, (C) neither McBee nor any of its Subsidiaries
shall have, nor shall the Borrower have assumed, any Indebtedness for
borrowed money, debt or other similar monetary obligations, including
guaranties of the obligations of others (with the guaranty obligations
of McBee and McBee Canada in respect of the ROMO Corp. Loan Agreement
being released in their entirety and all obligations of McBee to ROMO
Corp. being cancelled or repaid in full prior to the consummation of the
McBee Acquisition) in excess of $250,000 in the aggregate, and (D) the
Borrower shall have acquired one hundred percent (100%) of the capital
stock of McBee and any of its Subsidiaries;
(iii) there shall be no material misstatements in or omissions
from the materials furnished to the Agent, the Banks and the Arranger
for their review in connection with the McBee Acquisition;
(iv) upon consummation of the McBee Acquisition, the stock and
assets of McBee and McBee Canada, respectively, and each of their
Subsidiaries shall be free and clear of any and all liens and
encumbrances, except for Permitted Liens;
(v) promptly following the consummation of the McBee
Acquisition, the Borrower shall deliver to the Agent and the Banks
revisions to the disclosure schedules attached to this Credit Agreement
and the other Loan Documents, and an updated certificate of locations of
the Borrower and its Subsidiaries, in each case reflecting solely the
materials disclosed by the McBee Asset Purchase Agreement and the McBee
Stock Purchase Agreement, provided, however, that the Borrower shall not
seek to revise (A) Schedule 5.18 to the Credit Agreement so as to
disclose any item which might adversely affect the properties, assets,
financial condition or business of the Borrower or its Subsidiaries or
(B) Schedules 7.1, 7.2 or 7.3 to the Credit Agreement; and
(vi) all parties to the McBee Asset Purchase Agreement and the
McBee Stock Purchase Agreement shall have received all necessary third
party consents and approvals.
<PAGE>
-3-
McBee Asset Purchase Agreement. The Asset Purchase Agreement
between the Borrower, NEBS Business Forms, McBee Canada and ROMO Corp.,
dated as of May 1, 1998, as in effect on the First Amendment Effective
Date.
McBee Canada. McBee Systems of Canada, Inc., an Ontario
corporation.
McBee Stock Purchase Agreement. The Stock Purchase Agreement
between the Borrower and ROMO Corp., dated as of May 1, 1998, as in
effect on the First Amendment Effective Date.
NEBS Business Forms. NEBS Business Forms Ltd., an Ontario
corporation.
ROMO Corp. ROMO Corp., a Colorado corporation.
ROMO Corp. Loan Agreement. The Loan Agreement dated March 17, 1993
between ROMO Corp. and US Bank, f/k/a/ Colorado National Bank."
(b) deleting the introductory paragraph of the definition of Permitted
Acquisition in its entirety and replacing it with the following new
introductory paragraph:
"Permitted Acquisition. The Rapidforms Acquisition, the McBee
Acquisition or any other acquisition of any Person, business, division,
or specified group of assets by the Borrower or any of its Subsidiaries,
provided that, with respect to any other such acquisition, (1) the Agent
and the Majority Banks approve, in their sole discretion, such
acquisition in writing in advance or (2) each of the following
conditions is met:"
(c) deleting the definition of Total Commitment in its entirety and
replacing it with the following new definition:
"Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time, which amount shall, as of the First Amendment
Effective Date, be $165,000,000."
2. Amendment to Section 2.5.1 of the Credit Agreement. Subsection
2.5.1 of the Credit Agreement is hereby amended by deleting the first
sentence thereof in its entirety and by replacing it with the following
sentence:
"2.5.1. Syndicated Notes. The Syndicated Loans shall be evidenced
by separate promissory notes of the Borrower in substantially the form
of Exhibit F-1 attached hereto (each a "Syndicated Note"), dated as of
the Closing Date or, as the case may be, the First Amendment Effective
Date and completed with appropriate insertions."
3. Amendment to Section 5 of the Credit Agreement. Section 5 of the
Credit Agreement is hereby amended by adding the following new sections at
the end thereof:
"5.24. McBee Acquisition. Upon the closing (if any) of the McBee
Acquisition, each of the representations and warranties made by the Borrower
and, to the best of the
<PAGE>
-4-
Borrower's knowledge, ROMO Corp. contained in the McBee Asset Purchase
Agreement or the McBee Stock Purchase Agreement shall have been true and
correct in all material respects when made and shall continue to be true and
correct in all material respects on the date of such closing, except to the
extent that any of such representations and warranties relate, by the express
terms thereof, solely to a date falling prior to the date of such closing,
and except to the extent that any of such representations and warranties may
have been affected by the consummation of the transactions contemplated and
permitted or required by the McBee Asset Purchase Agreement or the McBee
Stock Purchase Agreement.
5.25. Year 2000 Problem. The Borrower and its Subsidiaries have
reviewed the areas within their businesses and operations which could be
adversely affected by, and have developed or are developing a program to
address on a timely basis, the "Year 2000 Problem" (i.e. the risk that
computer applications used by either the Borrower or any of its Subsidiaries
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999).
Based upon such review, the Borrower reasonably believes that the "Year 2000
Problem" will not have any materially adverse effect on the business or
financial condition of the Borrower and its Subsidiaries taken as a whole."
4. Addition of Section 6.15 to the Credit Agreement. Section 6 of the
Credit Agreement is hereby amended by adding the following new Section 6.15
at the end thereof:
"6.15. McBee Acquisition.
6.15.1. McBee Guaranty, etc. Promptly following the consummation
of the McBee Acquisition, the Borrower shall (a) cause McBee and each of
its Subsidiaries to execute and deliver to the Agent a Guaranty, in the
form of Exhibit A hereto, of the Obligations under this Credit Agreement
and the other Loan Documents, together with such evidence of corporate
authorization, other corporate documentation and legal opinions
(including, where applicable, local counsel opinions of Colorado or
other local counsel) as the Agent may reasonably request, (b) deliver to
the Agent evidence satisfactory to the Agent, of the release of: (i)
all guaranty obligations under the ROMO Corp. Loan Agreement, and
(ii) all security interests and liens securing such guaranty
obligations, pursuant to UCC-3 termination statements and other
appropriate release or termination documents; and (c) deliver to the
Agent evidence satisfactory to the Agent of the repayment and release of
all obligations of McBee to ROMO Corp. and of any and all security
interests and liens securing such obligations, pursuant to UCC-3
termination statements and other appropriate release or termination
documents. Within 30 days following the First Amendment Effective Date,
the Borrower shall deliver to the Agent evidence satisfactory to the
Agent of the termination of (x) the security interest of First City,
Texas - Houston, N.A. against McBee Canada, as evidenced by financing
statement 900931338 filed June 7, 1989 with the Ministry of Consumer and
Commercial Relations, Province of Ontario, Canada, and (y) to the extent
not otherwise permitted by Section 7.2, any other financing statements
revealed by Uniform Commercial Code or Personal Property Security Act of
Canada searches conducted against McBee or McBee Canada at the request
of the Agent.
6.15.2. Closing Balance Sheet. The Borrower shall deliver to the
Agent and the Banks, promptly upon receipt thereof from McBee and McBee
Canada, the Closing Balance Sheet (as defined in the McBee Stock
Purchase Agreement)."
5. Amendment to Section 7.1 of the Credit Agreement. Section 7.1
of the Credit Agreement is hereby amended by deleting paragraph (m) in its
entirety and by replacing it with the following paragraph (m):
<PAGE>
-5-
"(m) Indebtedness for borrowed money, debt or similar monetary
obligations assumed in respect of Permitted Acquisitions (other than the
Rapidforms Acquisition or the McBee Acquisition), to the extent
permitted by paragraph 2(b) of the definition thereof, and other
Indebtedness assumed in respect of Permitted Acquisitions (other than
the Rapidforms Acquisition) and existing prior to the date of any
Permitted Acquisition and not created in contemplation thereof;"
6. Amendment to Section 7.3 of the Credit Agreement. Section 7.3 of
the Credit Agreement is hereby amended by deleting paragraph (k) in its
entirety and by replacing it with the following paragraph (k):
"(k) Investments in respect of (i) Permitted Acquisitions (other than
the Rapidforms Acquisition or the McBee Acquisition) to the extent permitted
by the definition thereof; (ii) the Rapidforms Acquisition to the extent
permitted by the definition thereof and Section 7.1(n); and (iii) the McBee
Acquisition to the extent permitted by the definition thereof and Section
7.1(m);"
7. Replacement of Schedule 1 to the Credit Agreement. Schedule 1 of
the Credit Agreement is hereby deleted in its entirety, and Schedule 1
attached hereto is hereby substituted in lieu thereof.
8. Representations and Warranties. The Borrower and each of the
Guarantors hereby represents and warrants to the Agent and the Banks as of
the date hereof, and as of any date on which the conditions set forth in
Section 9 below are met, as follows:
(a) The execution and delivery by each of the Borrower and the
Guarantors of this Amendment and all other instruments and agreements
required to be executed and delivered by the Borrower or any of the
Guarantors in connection with the transactions contemplated hereby or
referred to herein (collectively, the "Amendment Documents"), and the
performance by each of the Borrower and the Guarantors of any of their
obligations and agreements under the Amendment Documents and the Credit
Agreement and other Loan Documents, as amended hereby, are within the
corporate authority of each of the Borrower and the Guarantors, have
been authorized by all necessary corporate proceedings on behalf of each
of the Borrower and the Guarantors, and do not and will not contravene
any provision of law or any of the Borrower's charter or any of the
Guarantors' charter, other incorporation papers, by-laws or any stock
provision or any amendment thereof or of any indenture, agreement,
instrument or undertaking binding upon the Borrower or any of the
Guarantors.
(b) Each of the Amendment Documents and the Credit Agreement and
other Loan Documents, as amended hereby, to which the Borrower or any of
the Guarantors is a party constitute legal, valid and binding
obligations of such Person, enforceable in accordance with their terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting generally the enforcement of
creditors' rights.
<PAGE>
-6-
(c) No approval or consent of, or filing with, any governmental
agency or authority is required to make valid and legally binding the
execution, delivery or performance by the Borrower or any of the
Guarantors of the Amendment Documents or the Credit Agreement or other
Loan Documents, as amended hereby, or the consummation by the Borrower
or any of the Guarantors of the transactions among the parties
contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in Section 5 of
the Credit Agreement and in the other Loan Documents were correct at and
as of the date made. Except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement and the
other Loan Documents, changes occurring in the ordinary course of
business (which changes, either singly or in the aggregate, have not
been materially adverse) and to the extent that such representations and
warranties relate expressly to an earlier date and after giving effect
to the provisions hereof, such representations and warranties, after
giving effect to this Amendment and the other Amendment Documents, also
are correct at and as of the date hereof and will be correct as of the
date of the closing of the McBee Asset Purchase Agreement and the McBee
Stock Purchase Agreement.
(e) Each of the Borrower and the Guarantors has performed and
complied in all material respects with all terms and conditions herein
required to be performed or complied with by it prior to or at the time
hereof (including, updating all disclosure required on each of the
schedules), and as of the date hereof, after giving effect to the
provisions of this Amendment and the other Amendment Documents, there
exists no Event of Default or Default.
(f) Each of the Borrower and the Guarantors acknowledges and
agrees that the representations and warranties contained in this
Amendment shall constitute representations and warranties referred to in
Section 11.1(e) of the Credit Agreement, a breach of which shall
constitute an Event of Default.
9. Effectiveness. This Amendment shall become effective upon the
satisfaction of each of the following conditions (the "Effective Date"), in
each case in a manner satisfactory in form and substance to the Agent and the
Banks:
(a) This Amendment shall have been duly executed and delivered by
each of the parties hereto;
(b) The Borrower shall have executed and delivered to the Agent an
amended and restated Revolving Credit Note in favor of each Bank which agrees
to increase its Commitment hereunder, in a principal amount equal to such
Bank's Commitment as allocated by the Agent hereunder, substantially in the
form of Exhibit F-1 to the Credit Agreement (the "Replacement Notes");
(c) The Agent shall have received from the Secretary of each of the
Borrower and the Guarantors a copy, certified by such Secretary to be true
and complete as of the date hereof, of
<PAGE>
-7-
each of (A) its charter or other incorporation documents as in effect on such
date of certification, (B) its by-laws as in effect on such date, and (C) the
resolutions of its Board of Directors authorizing, to the extent it is a
party thereto, the execution, delivery and performance of this Amendment, the
Replacement Notes and any other Amendment Documents;
(d) The Agent shall have received from the Borrower copies of the
most recent audited combined financial statements of McBee Systems, Inc., a
Colorado corporation ("McBee"), and McBee Systems of Canada, Inc., an Ontario
corporation ("McBee Canada");
(e) The Agent shall have received from the Borrower a compliance
certificate evidencing pro forma compliance with the requirements of Section
8 (as amended hereby) of the Credit Agreement in the form of Exhibit G to the
Credit Agreement, duly certified by the principal financial or accounting
officer of the Borrower, indicating the Borrower's compliance with the
financial covenants set forth in Section 8 of the Credit Agreement,
immediately prior to and following the consummation of the McBee Acquisition
(as defined in the Credit Agreement as amended hereby);
(f) The Agent shall have received from each of the Borrower and the
Guarantors an incumbency certificate, dated as of the date hereof, signed by
a duly authorized officer of the Borrower or the Guarantor, as the case may
be, and giving the name and bearing a specimen signature of each individual
who shall be authorized to sign, in the name and on behalf of the Borrower or
the Guarantor, as the case may be, the Amendment Documents;
(g) The Agent shall have received from the Borrower: (i) a completed
and fully executed certificate of locations for each of McBee and McBee
Canada, (ii) the results of UCC searches of McBee, and (iii) Personal
Property Security Act of Canada searches (PPSA searches) of McBee Canada,
indicating no liens other than Permitted Liens and otherwise in form and
substance satisfactory to the Agent;
(h) The Agent shall have received from the Borrower good standing
certificates for each of the Borrower and the Guarantors, issued by the
Secretary of State of each such entity's jurisdiction of incorporation and of
each jurisdiction in which such entity has qualified to do business;
(i) The Agent shall have received from the Borrower copies of each
of the McBee Asset Purchase Agreement (as defined in the Credit Agreement as
amended hereby) and the McBee Stock Purchase Agreement (as defined in the
Credit Agreement as amended hereby), together with the certification of a
duly authorized officer of the Borrower that such copies are true, correct
and complete and have not been amended, modified, rescinded, revoked or
supplemented; and
(j) The Agent shall have received a favorable legal opinion
addressed to the Agent and the Banks, dated as of the date hereof, in form
and substance satisfactory to the Agent, from Hill and Barlow with respect to
the Borrower and each Guarantor; provided, however, that such opinion may
assume the due incorporation, good standing and the due authorization,
execution and delivery of the Amendment Documents by Rapidforms and Newshire
Forms, Inc.
<PAGE>
-8-
10. Miscellaneous Provisions.
(a) Each of the Borrower and the Guarantors hereby ratifies and
confirms all of its Obligations to the Agent and the Banks under the Credit
Agreement, as amended hereby, and the other Loan Documents, including,
without limitation, the Loans and the reimbursement obligations, and each of
the Borrower and the Guarantors hereby affirms its absolute and unconditional
promise to pay to the Banks and the Agent the Loans, reimbursement
obligations and all other amounts due or to become due and payable to the
Banks and the Agent under the Credit Agreement and the other Loan Documents,
as amended hereby. Except as expressly amended hereby, each of the Credit
Agreement and the other Loan Documents shall continue in full force and
effect. This Amendment and the Credit Agreement shall hereafter be read and
construed together as a single document, and all references in the Credit
Agreement, any other Loan Document or any agreement or instrument related to
the Credit Agreement shall hereafter refer to the Credit Agreement as amended
by this Amendment.
(b) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS) AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE
WITH SUCH LAWS.
(c) This Amendment may be executed in any number of counterparts, and
all such counterparts shall together constitute but one instrument. In
making proof of this Amendment it shall not be necessary to produce or
account for more than one counterpart signed by each party hereto by and
against which enforcement hereof is sought.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Amendment to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.
New England Business Service, Inc.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Vice President, CFO and
Treasurer
BANKBOSTON, N.A.,
individually and as Agent
By:/s/ Harvey H. Thayer, Jr.
-------------------------
Name: Harvey H. Thayer, Jr.
Title: Director
FLEET NATIONAL BANK,
individually and as Documentation Agent
By:/s/ Thomas F. Brennan
---------------------
Name: Thomas F. Brennan
Title: Vice President
FIRST UNION NATIONAL BANK, N.A.,
successor to CoreStates Bank, N.A.
By:/s/ Jon R. Sundstrom
--------------------
Name: Jon R. Sundstrom
Title: Vice President
<PAGE>
KEY BANK N.A.
By:/s/ Noel B. Graydon
-------------------
Name: Noel B. Graydon
Title: Vice President
USTRUST
By:/s/ Brian C. Roche
------------------
Name: Brian C. Roche
Title: Vice President
SUNTRUST BANK, ATLANTA
By:/s/ W. David Wisdom
-------------------
Name: W. David Wisdom
Title: Group Vice President
SUNTRUST BANK, ATLANTA
By:/s/ Karen Copeland
------------------
Name: Karen Copeland
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By:/s/ T.M. Pirher
---------------
Name: T.M. Pirher
Title: Authorized Signatory
WACHOVIA BANK, N.A.
By:/s/ Jeffrey S. Nurkiewicz
-------------------------
Name: Jeffrey S. Nurkiewicz
Title: Vice President
<PAGE>
KREDIETBANK N.V.
By:/s/ Robert M. Surdam, Jr.
-------------------------
Name: Robert M. Surdam, Jr.
Title: Vice President
KREDIETBANK N.V.
By:/s/ Robert Snauffer
-------------------
Name: Robert Snauffer
Title: Vice President
SUMMIT BANK
By:/s/ Christopher J. Annas
------------------------
Name: Christopher J. Annas
Title: Regional Vice President
<PAGE>
Signature page
to the First Amendment
The undersigned hereby acknowledges the foregoing First Amendment as of
the Effective Date, agrees to the provisions of Sections 8 and 10 hereof, and
agrees that its obligations under the Guaranty will extend to the Credit
Agreement, as so amended, and the other Loan Documents.
RAPIDFORMS, INC.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Assistant Treasurer
RUSSELL & MILLER, INC.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Assistant Treasurer
NEWSHIRE FORMS, INC.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Assistant Treasurer
RAPDEL, INC.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Assistant Treasurer
NEBS INTERACTIVE, INC.
By:/s/ John F. Fairbanks
---------------------
Name: John F. Fairbanks
Title: Vice President
<PAGE>
Exhibit 10.2
NEW ENGLAND BUSINESS SERVICE, INC.
500 Main Street
Groton, Massachusetts 01471
Agreement to Furnish Copies of Omitted Exhibits and
Schedules to Revolving Credit Agreement
New England Business Service, Inc. (the "Registrant")
is not filing as exhibits to its Current Report on Form 8-K
dated June 18, 1998, copies of the exhibits and schedules to
the Revolving Credit Agreement dated as of May 29, 1998, by
and among New England Business Service, Inc., BankBoston,
N.A. and Fleet National Bank (together with certain other
financial institutions, the "Banks"), BankBoston, N.A., as
agent for the Banks, and Fleet National Bank, as
documentation agent for the Banks, which Agreement is filed
as Exhibit 10.1 thereto.
Registrant agrees to furnish to the Securities and
Exchange Commission, upon request, copies of such omitted
exhibits and schedules.
Dated: June 18, 1998
NEW ENGLAND BUSINESS
SERVICE, INC. (Registrant)
By: /s/ John F. Fairbanks
---------------------
John F. Fairbanks
VP, Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated February 20, 1998, included in this Form 8-K into New
England Business Service, Inc.'s previously filed Registration Statement Nos.
2-69422, 2-72662, 33-38925, 33-43900, 33-56227, 333-32719, 333-
44819 and 333-44825 on Form S-8 and Registration Statement No. 333-
26499 on Form S-3.
/s/ Arthur Andersen LLP
- -----------------------
Denver, Colorado
June 17, 1998
